This Is Why Analysts Are Bullish on Arm Holdings IPO
Key Takeaways
- Arm Holdings, a subsidiary of SoftBank, is the maker of semiconductors
- Analysts are weighing in on the Arm Holdings IPO after the company raised $4.87 billion
- Sentiment on Arm is overall bullish
Arm Holdings is one of the most-watched IPOs of the year after successfully raising $4.87 billion last month. That makes it the largest IPO on a United States exchange since Rivian Automotive’s $13.7 billion offering two years ago.
Things have been slow on the IPO front lately, so this one is getting a lot of attention. We’ll dig into the details below.
The TL;DR on Arm Holdings
Arm, categorized as a semiconductor company, doesn’t operate in the most user-friendly niche, but we’ll do our best to sum up the business: Basically, the company designs ARM-based processors, hence the name. ARM-based processors are unique because they work as an integrated part of a computer’s build.
If you’ve stopped reading already — don’t worry. You don’t need to get into the weeds of semiconductors to understand Wall Street’s take on the company’s IPO. It’s worth knowing that chip stocks have risen this year, mostly driven by excitement over AI technology.
Now that the quiet period is coming to a close, major analysts are providing their insights on the ARM IPO. And mostly, they are feeling optimistic. Last year was the worst for U.S. public offerings in over 30 years, so one that offers some promise and analyst excitement feels particularly noteworthy.
“Arm…is successfully leveraging its significant developer ecosystem (15 million+ software developers) and near 100% market share in smartphones to move into the automotive, industrial/IoT, and datacenter segments of the market,” J.P. Morgan analyst Harlan Sur wrote on Monday, summarizing the largely bullish sentiment toward the company.
Wall Street’s Take
Several of the big players started coverage of Arm Holdings with buy-equivalent ratings, including Goldman Sachs and Citi. This is a month after the company’s IPO. At the root of the bullishness across the board is an expectation of big top- and bottom-line growth from Arm.
Goldman Sachs started Arm with a $62 price target, citing Arm’s expansion in the smartphone market and the company’s ability to extend into other areas like automotive and data center.
Goldman is predicting a three-year compound annual growth rate of some 16% for revenue through fiscal 2026.
Citi analysts, meanwhile, set a $65 price target. They point to Arm’s potential to be the dominant provider of independent silicon IP in the semiconductor market. They said Arm “has long been dominant in mobile, but can now benefit from providing additional content at higher prices into a mature market. In the more rapidly growing infrastructure space, long-awaited share gains in servers are evident.” Citi predicted 18% CAGR to fiscal 2027.
The bottom line
At time of writing, Arm shares are at $55.20, up 1.74% today. If we zoom out further, the positive outlook on Arm’s IPO might boost investor confidence more broadly on what has been a sluggish IPO environment.
