Arm Keeps Soaring on Strong AI Adoption, Monetization - but Is It Worth the Hype?
Shares of British semiconductor and software design company Arm Holdings (NASDAQ:ARM) have been on a roller on Wall Street this year. Despite the Cambridge-based company's 20% drop yesterday, the microprocessor manufacturer is still up nearly 60% in 2024.
In fact, since the company's heavily-priced $51 IPO on September 14th, Arm has more than doubled its market cap.
The obvious factor behind Arm's incredible performance is the broader AI hype driving the market narrative this year. In fact, the company has been taking several steps towards improving and monetizing its AI offerings, such as the adoption of AI design in all its chips.
But there's more to it. In fact, on the back of solid sales of its latest generation chip, ARMv9, the company has been able to post earnings and outlook beyond expectations. This has even led Morgan Staley to recently more than double its price target for the chipmaker.
But as the company looks set to keep drawing market attention, the question preying on investors' minds is: is it worth the hype?
Let's take a close look at the company's fundamentals with InvestingPro to understand where we stand right now.
Between October and December 2023, the company recorded $824 million in revenue (+14% year over year), surpassing analysts' expected revenue of $761 million by 8%.
Furthermore, Arm has raised expectations for growth. The company anticipates achieving revenue between $850 million and $900 million between January and March, with earnings per share (EPS) of 30 cents.
On February 2nd, the experts' forecast from InvestingPro was stuck at 20 cents per share for the next quarter.
But what is the fair value of the British company?
According to analysts and valuation models, Arm's shares, with a
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