Arm Holdings (ARM) is rallying in today’s trading after Raymond James initiated coverage on the chip stock with a Buy rating and a $160 price target. The firm, led by top-rated analyst Srini Pajjuri, believes that Arm is in a great position to benefit from the fast-growing demand for AI in cloud and edge computing thanks to its energy-efficient processor technology.
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It expects Arm to see strong growth in multiple markets, such as mobile, automotive, data center, and PC, due to its latest ARMv9 architecture, which brings in higher royalties. Compute Subsystems (highly specialized sets of hardware and software solutions that are optimized for specific tasks) are considered to be another catalyst for the company, along with low-power CPUs. In addition, Raymond James thinks Arm might expand into data center AI accelerator technology, which would increase its market potential.
Furthermore, while competition from RISC-V (an open-source processor architecture that allows companies to use and modify it without licensing fees) is growing, the firm does not see it seriously challenging Arm’s dominance. It believes Arm’s strong position in the AI market and its pricing power justify its premium valuation.
It’s worth noting that, so far, Pajjuri has enjoyed a 62% success rate on his stock ratings, with an average return of 17.6% per rating.
What Is the Future Price of ARM Stock?
Overall, analysts have a Moderate Buy consensus rating on ARM stock based on 14 Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 144% rally in its share price over the past year, the average ARM price target of $140.27 per share implies 5.34% downside risk.
