Shares of Arm Holdings PLC (ARM) are up 3% in Monday morning’s trading session after news hit that the bulls love this stock. In fact, some analysts see as much as a 57% upside potential in the stock.
The company, which specializes in chip design, is trading only 6% above its IPO price. That could change with this new narrative, though. At least seven analysts have taken buy-equivalent stances with just two saying the stock is a hold.
According to Rosenblatt analyst Hans Mosesmann, Arm is in a position where it can capitalize on strong secular growth trends in edge computing, AI, automotive, and IoT.
Meanwhile, he suggests investors consider the company’s deep and broad multi-decade customer and ecosystem presence. While the stock has only been publicly traded for a few weeks, the UK-founded company traces its roots back to 1990. But the company is in a better position than ever.
As the excitement around new technologies mounts, it’s companies like Arm that stand to gain the most. After all, the semiconductors that Arm manufactures are the foundation of all this.
That being said, some analysts remain more cautious – perhaps skeptical. BMO Capital Markets analyst Ambrish Srivastava, for example, says the stock is fully valued as it currently stands.
So, what does all this mean for you? Should you buy ARM in hopes that it will reach the price target some analysts have set of more than $80/share?
We’ve taken a look at this stock through the VectorVest system and aren’t quite as upbeat as the bulls. Keep reading to discover 3 reasons this stock is still just rated as a hold in VectorVest.
Despite Fair Timing, ARM Has Poor Upside Potential and Safety
The VectorVest system simplifies your trading strategy by telling you what to buy, when to buy it, and when to sell it. It’s all based on a proprietary stock rating system that gives you clear, actionable insights in just 3 ratings.
These are relative value (RV), relative safety (RS), and relative timing (RT). Each sits on its own scale of 0.00-2.00 with 1.00 being the average. Based on the overall VST rating for a given stock, the system issues a clear buy, sell, or hold recommendation. Here’s what you need to know about ARM…
- Poor Upside Potential: The RV rating is a comparison between a stock’s long-term price appreciation potential (forecasted 3 years out) and AAA corporate bond rates. This offers far superior insights than a simple comparison of price to value alone. But right now ARM has a poor RV rating of 0.69.
- Poor Safety: The RS rating is an indicator of risk. It’s derived through a detailed analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. As for ARM, the RS rating of 0.74 is poor.
- Fair Timing: We don’t have much historical data to go on as the stock IPOd on September 14, but its timing is just fair right now with an RT rating of 0.87. This is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 0.78 is poor for ARM, and VectorVest currently recommends holding off on buying or selling the stock. Learn more through a free stock analysis today and elevate your investment strategy to remove human error, emotion, and guesswork!
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VectorVest advocates buying safe, undervalued stocks, rising in price. While some analysts think ARM could climb as much as 57%, VectorVest isn’t convinced. The stock has fair timing (albeit below average) with poor upside potential and safety.
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