Sara Russo, an analyst from Bernstein, reiterated the Sell rating on ARM Holdings PLC ADR (ARM – Research Report). The associated price target remains the same with $100.00.
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Sara Russo’s rating is based on a combination of factors that highlight both the strengths and challenges for ARM Holdings PLC ADR. Despite ARM’s strong quarterly performance, with revenues and earnings per share surpassing expectations, there are concerns about the sustainability of its current valuation. The company’s stock trades at a high price-to-earnings ratio, significantly above industry averages, which Bernstein finds difficult to justify.
While ARM’s long-term growth prospects appear promising, particularly in AI and its CSS offerings, there is a shift in focus towards licensing, with a slight decline expected in royalty revenues. Additionally, the company’s commitment to increasing research and development expenditure, while necessary for future growth, may limit margin expansion in the short term. These factors contribute to the decision to maintain a Sell rating, reflecting skepticism about the current valuation levels.
Based on the recent corporate insider activity of 10 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of ARM in relation to earlier this year.