Arm Holdings Stock Trades 30% Off High Despite Strong Market Share Gains

Arm Holdings' stock dips 30% despite market share gains, as concerns over growth and valuation weigh. Analysts remain divided on the chip designer's prospects, with some seeing a buying opportunity amid the AI chip boom.

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Arm Holdings Stock Trades 30% Off High Despite Strong Market Share Gains

Arm Holdings Stock Trades 30% Off High Despite Strong Market Share Gains

Arm Holdings Plc, a semiconductor technology company, has seen its stock trade 30% off its high in 2024 despite strong market share gains in key chip markets.

The stock opened at $100.00 on Friday, down from the previous close of $104.92, with shares last trading at $101.67. Investors are considering the company's growth prospects and valuation.

Arm, which designs semiconductor architecture and earns royalties whenever its designs are used in chips, has seen significant market share gains in various end markets, including mobile applications processors, industrial IoT and embedded, networking equipment, cloud computing, and automotive. The company is expected to generate $3.1 billion in revenue this year and be profitable, with analysts estimating earnings of $1.20 per share.

However, the stock has cooled off after a period of optimism driven by the growth in the chip industry, especially with AI chips. A downbeat report from ASML, a key supplier, has dragged down other AI stocks, including Arm. Concerns about Arm's growth and valuation have also contributed to the stock's decline.

Why this matters: Arm's stock performance and valuation are closely watched as indicators of the broader semiconductor industry's health and growth prospects, particularly in the rapidly evolving AI chip market. The company's ability to maintain market share gains and deliver consistent revenue growth will be key factors in shaping investor sentiment and the stock's future trajectory.

Despite the recent dip, some analysts believe the buying opportunity for semiconductor stock investors might be around the corner, as the long-term prospects for the chip industry, driven by AI, are expected to benefit Arm. Rosenblatt Securities increased their price target for Arm from $140.00 to $180.00 and gave the company a 'buy' rating, while Susquehanna reissued a 'neutral' rating and $85.00 price target. BNP Paribas cut the stock from 'outperform' to 'neutral' with a $100.00 target price. Overall, the stock has an average rating of 'Hold' and a consensus target price of $90.28, according to data from MarketBeat.com.

Key Takeaways

  • Arm Holdings stock down 30% from 2024 high despite market share gains
  • Arm is expected to generate $3.1B revenue, be profitable in 2024
  • Stock decline due to downbeat ASML report, concerns over Arm's growth and valuation
  • Arm's performance seen as indicator of broader semiconductor industry health
  • Analysts have mixed ratings on Arm stock, with average 'Hold' and $90.28 target