The market seems unfazed about KeyBanc Capital Markets’ Overweight rating on Arm Holdings (NASDAQ:ARM), with shares of the semiconductor and software design company slipping during trading hours on Wednesday. Analysts at KeyBanc had a more-than-optimistic view when they concluded that the “world increasingly needs Arm.”
Notably, the analysts believe the company will benefit from key semiconductor design trends, including rising chip complexity. They predict this will happen as evolving computing chip designs “increasingly compensate for scaling challenges resulting from the demise of Moore’s Law.”
“ARM stands to benefit as computing requirements across mobile, data center, auto, and IoT become increasingly more demanding and complex; this will only increase the industry’s reliance on Arm IP, ultimately resulting in royalty rate expansion and market share gains,” the analysts wrote.
The analysts, led by John Vinh, also placed a $65 price target on Arm, suggesting a nearly 30% upside potential from current levels. In addition, they stated that the increased adoption of Armv9 could drive up the revenue the company generates through royalties. By their estimates, the royalty rate, currently at 1.7%, could rise to 2.5% by 2026.
What is the Stock Price Forecast for ARM?
Turning to Wall Street, analysts have a Strong Buy consensus rating on ARM stock based on 12 Buys, four Holds, and zero Sells assigned in the past three months, as indicated by the graphic above. Furthermore, the average ARM price target of $62.21 per share implies 20.8% upside potential.
