{"id":62506,"date":"2023-09-18T11:51:51","date_gmt":"2023-09-18T15:51:51","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/arms-stock-already-draws-a-bearish-call-it-is-too-soon-to-declare-them-an-ai-winner\/"},"modified":"2023-09-18T11:51:54","modified_gmt":"2023-09-18T15:51:54","slug":"arms-stock-already-draws-a-bearish-call-it-is-too-soon-to-declare-them-an-ai-winner","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=62506","title":{"rendered":"Arm\u2019s stock already draws a bearish call: \u2018It is too soon to declare them an AI winner\u2019"},"content":{"rendered":"
\n

Typically investors need to wait a few weeks to get stock coverage of a company that recently went public, but an analyst at Bernstein, which didn\u2019t help underwrite the initial public offering, has already weighed in with a bearish rating on shares of Arm Holdings PLC. <\/p>\n

\u201cWhile expectations that Arm will be a beneficiary from AI growth may be adding a
premium to the share price, we believe it is too soon to declare them an AI winner,\u201d Bernstein\u2019s Sara Russo wrote in a Monday note to clients. \u201cIn addition, we remain more conservative on their ability to deliver increased royalty rates at the pace management is guiding.\u201d<\/p>\n

\n

U.S.-listed shares of Arm
\n ARM,
\n -4.79%<\/bg-quote>
\n began trading Thursday, and they closed Friday at $60.75, 19% above their $51 IPO price. The stock is off more than 3% in Monday\u2019s premarket trading.<\/p>\n

Russo said she sees room for downside on shares of the chip designer, initiating coverage with an underperform rating and $46 target price.<\/p>\n

She expressed caution about the longer-term royalty picture for Arm. \u201cWhile [Arm\u2019s management is] signaling reaching 5% royalties by FY26, we anticipate it takes longer to reach that,\u201d she wrote. \u201cWe expect them to be approaching ~4% by FY27 and see [room for a] modest increase after that.\u201d<\/p>\n

Russo said she is also concerned about RISC-V, an open-source rival to Arm\u2019s technology.<\/p>\n

\u201cOpen source software has proved a successful model, with Linux as an example of an open-source alternative that grew into a sizable commercial success,\u201d Russo wrote. <\/p>\n

Opinion:<\/strong>\u00a0SoftBank\u2019s Arm is going public, but it faces a rapidly growing threat<\/p>\n

She wrote that she views RISC-V as a Linux for the hardware market, and expects that companies could establish themselves as specialists in the technology, helping others capitalize. <\/p>\n

\u201cMuch like Red Hat was able to develop a very successful commercial operation enabling enterprises to take advantage of all the benefits of open-source in a scalable way, we believe that the plethora of RISC-V specialists are likely to breed a number of \u2018Red Hats\u2019 that are able to make a commercial success of basing their designs on RISC-V,\u201d she continued. <\/p>\n

Opinion:<\/strong>\u00a0Arm deal is expected to lift tech IPOs, but not all future debuts will have the same draw<\/p>\n

FactSet listed Russo as one of three analysts who already cover Arm\u2019s stock. <\/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 Needham\u2019s Charles Shi wrote last week, in beginning coverage with a hold rating. <\/p>\n

FactSet indicated the third analyst \u2014 Pierre Ferragu of New Street Research \u2014 has a bullish stance.<\/p>\n<\/p><\/div>\n<\/div>\n

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

Typically investors need to wait a few weeks to get stock coverage of a company that recently went public, but an analyst at Bernstein, which didn\u2019t help underwrite the initial public offering, has already weighed in with a bearish rating on shares of Arm Holdings PLC. \u201cWhile expectations that Arm will be a beneficiary from […]<\/p>\n","protected":false},"author":1,"featured_media":62507,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-62506","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nArm\u2019s stock already draws a bearish call: \u2018It is too soon to declare them an AI winner\u2019 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Typically investors need to wait a few weeks to get stock coverage of a company that recently 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