Shares of Arm Holdings (NASDAQ:ARM) plunged in after-hours trading after the chip maker reported earnings for its fourth quarter of Fiscal Year 2024. Earnings per share came in at $0.36, which beat analysts’ consensus estimate of $0.30 per share. Sales increased by 46.6% year-over-year, with revenue hitting $928. This also beat analysts’ expectations of $878.2 million.
Looking forward, management now expects revenue and adjusted earnings per share for Q1 2025 to be in the ranges of $875 million to $925 million and $0.32 to $0.36, respectively. For reference, analysts were expecting $864 million in revenue along with an adjusted EPS of $0.31.
Why Did ARM Shares Fall?
Some people might be scratching their heads right now, wondering why shares fell. After all, the company beat on earnings and revenue and surpassed expectations with its guidance. However, the stock was already trading at a lofty valuation and saw its price rally into earnings. Therefore, it’s likely that today’s results were already priced in, which caused investors to “sell the news” (selling when expected news is announced).
Interestingly, TipRanks’ “Bulls Say, Bear Say” tool had warned about the company’s valuation. Indeed, the Financial Performance heading pictured below states that the “valuation is considered too high, leading to an Underperform rating.”
What Is the Future of Arm Holdings?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ARM stock based on six Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 75% rally in its share price over the past year, the average ARM price target of $116.67 per share implies 9.56% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
