Wall Street Brokerages Give Top Ratings to Arm Holdings, Expecting Earnings Growth

Several Wall Street brokerages have initiated coverage of Arm Holdings, the chip designer, with top ratings, citing its dominance in the smartphone market and potential expansion into data centers as key drivers of future earnings growth. This marks the end of the quiet period for the banks that underwrote Arm’s recent initial public offering (IPO), which raised $4.87 billion for its owner, SoftBank Group.

Brokerages such as J.P. Morgan and Goldman Sachs have expressed confidence in Arm’s strategy to increase revenue through higher royalty fees and by gaining a larger market share in the cloud and automotive sectors. Despite facing challenges from a slump in the smartphone market, where it currently holds a 99% share across Android and iOS devices, Arm is expected to extend its reach into under-indexed applications.

Goldman Sachs, setting a price target of $62, believes that Arm will expand its presence in the smartphone market through higher royalty rates and diversify its revenue streams. Other brokerages, including Citi, Deutsche Bank, Mizuho, and TD Cowen, have set price targets ranging from $60 to $70, with J.P. Morgan being the most bullish.

While some analysts, such as those at HSBC, have urged caution due to uncertainties surrounding a smartphone market recovery, at least 15 brokerages have initiated coverage on Arm with a mean rating of “buy” and a median price target of $60.

Arm’s growth potential is not only significant for the company itself but also for SoftBank, which plans to remain the majority owner and considers Arm its crown jewel. Citi predicts that Arm could become one of the fastest-growing large chip companies, with an estimated compounded annual revenue increase of 18% through fiscal year 2027.

Arm shares closed slightly below their IPO price at $54.08, but the positive ratings from Wall Street brokerages indicate optimism for future growth. As Arm continues to explore opportunities beyond smartphones, such as data centers and automotive applications, the company aims to unlock its full potential and deliver strong financial results.