{"id":61138,"date":"2023-09-14T22:56:14","date_gmt":"2023-09-15T02:56:14","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/arm-shares-had-a-big-debut-why-one-analyst-advises-against-buying-them\/"},"modified":"2023-09-14T22:56:17","modified_gmt":"2023-09-15T02:56:17","slug":"arm-shares-had-a-big-debut-why-one-analyst-advises-against-buying-them","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=61138","title":{"rendered":"Arm Shares Had a Big Debut. Why One Analyst Advises Against Buying Them."},"content":{"rendered":"
\n

\n Arm Holdings
\n had a spectacular return to the public market. The stock priced at the high end of the expected range of $47 to $51, opened 10% higher on Thursday at $56.10 and closed at $63.59, for a first day gain of nearly 25%. <\/p>\n

That gives the company a valuation of $68 billion, more than 25 times the company\u2019s revenues for the March 2023 fiscal year.<\/p>\n

\n

The way Needham analyst Charles Shi sees it, Arm\u2019s valuation is simply too high.<\/p>\n

Shi launched coverage of the stock on Thursday afternoon with a Hold rating, and without a price target. His view is that while Arm (ticker: ARM) has completely dominated the smartphone market\u2014almost every handset includes a chip with an Arm-based design\u2014he thinks growth gets tougher from here.<\/p>\n

\u201cArm\u2019s architecture is a foundation of smartphones, but we believe the world is entering a post-smartphone era that will see high-performance computing and IoT lead the next phase of semiconductor growth,\u201d Shi writes in a research note.<\/p>\n

Shi\u2019s view is that Arm\u2019s historic success in securing slots in smartphones reflects \u201ca tightly controlled ecosystem.\u201d But he adds that in new growth areas, \u201cnot only do viable alternatives to Arm exist, but ecosystem control often resides in the hands of others.\u201d <\/p>\n

Shi thinks Arm can grow by capturing more value from smartphones\u2014there\u2019s no market share left to take\u2014but contends there isn\u2019t enough potential to support upside from the stock\u2019s IPO valuation. \u201cWe\u2026await a better entry point,\u201d he writes.<\/p>\n

\u201cJust like Intel finds it difficult to replicate its success outside of PCs, we think Arm will face challenges outside of smartphones at the time when high-performance computing is replacing smartphones as the growth driver of the semiconductor industry,\u201d he writes.<\/p>\n

Shi says that the company\u2019s \u201cmixed financial performance\u201d between 2016 and 2021 reflects challenges Arm has faced monetizing its internet of things business to the same degree as smartphones. He notes that IoT remains under 10% of royalty revenue, despite accounting for 70% or more of the total number of Arm-based parts shipped.<\/p>\n

The analyst adds that the next phase of chip growth will be driven by generative AI applications in the data center. He notes that the data center ecosystems are \u201cfirmly\u201d in the hands of
\n Nvidia
\n when it comes to graphics processors, or GPUs, while Intel and AMD still dominate in the market for CPUs, or central processing units. And he notes that the open source RISC-V standard is narrowing the gap with Arm for non-smartphone applications on performance, power consumption and total cost of ownership. \u201cHow Arm will overcome the ecosystem challenges and outcompete RISC-V is unclear to us,\u201d he writes.<\/p>\n

Write to Eric J. Savitz at eric.savitz@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Arm Holdings had a spectacular return to the public market. The stock priced at the high end of the expected range of $47 to $51, opened 10% higher on Thursday at $56.10 and closed at $63.59, for a first day gain of nearly 25%. That gives the company a valuation of $68 billion, more than […]<\/p>\n","protected":false},"author":1,"featured_media":61139,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-61138","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nArm Shares Had a Big Debut. Why One Analyst Advises Against Buying Them. | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Arm Holdings had a spectacular return to the public market. 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