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Arm Holdings (ARM) Hits 52-Week High: What's Next for Investors?
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Shares of Arm Holdings plc (ARM - Free Report) reached a 52-week high of $188.75 on Jul 9 before slightly dipping to close at $182.28.
This year, ARM shares have seen an impressive rise of 156%, significantly outpacing the industry’s 22% rally. The remarkable performance of the stock can be attributed to the ongoing excitement around advanced artificial intelligence (AI) software and the associated hardware. Moreover, investors in Arm are closely monitoring both the global and American economic landscapes.
Considering the persistent strength of ARM shares, investors might be wondering if now is the right time to invest in the stock. Let’s delve deeper into this question.
ARM and AI: Beyond the Frenzy
ARM leverages AI to develop sophisticated chip designs and software tools, which are utilized in smartphones, automobiles and data centers. Major semiconductor manufacturers like Apple (AAPL - Free Report) , NVIDIA (NVDA - Free Report) and Qualcomm (QCOM - Free Report) rely on ARM’s chip designs. The company provides foundational designs that its clients can further customize and develop.
The current enthusiasm for AI technologies has considerably boosted investor interest in companies like ARM that are involved in AI hardware. The positive market sentiment toward AI advancements has been a significant driver of ARM's stock performance.
However, the company’s strategic positioning within the AI ecosystem suggests a potential for sustained growth beyond the current AI excitement. Its advanced v9 architecture and power-efficient processor platforms have garnered attention from major industry players, enhancing ARM's competitive position in the semiconductor market. Additionally, its inclusion in the Nasdaq-100 Index within 10 months of its initial public offering underscores its growing significance in the global technology sector.
ARM had forecasted around 20% sequential growth in Royalty revenues for the fiscal first quarter, anticipating a higher adoption of v9, which typically commands double the royalty rates compared to Armv8 products. Royalty revenues have been boosted by the resurgence of the smartphone market and increased market share outside mobile.
Strong Top and Bottom-line Prospects
The Zacks Consensus Estimate for ARM’s fiscal 2025 earnings is pegged at $1.55, indicating 22.1% growth from the year-ago level. Earnings in fiscal 2026 are expected to increase 35.2% from the prior-year actuals.
Image Source: Zacks Investment Research
The company’s sales are expected to increase 23.8% and 22.9% year over year, respectively, in fiscal 2025 and 2026.
Image Source: Zacks Investment Research
Consider Waiting for a Better Entry Point
Given the stock’s substantial 156% increase over the past year, it may experience a correction soon. Currently, ARM is trading above its 50-day moving average, and the relative strength index indicates that the stock is in the overbought zone. Therefore, it might be wise for investors to wait for a potential correction.
ARM Stock Trades Above 50-Day Average
Image Source: Zacks Investment Research
While ARM remains fundamentally strong, a more advantageous entry point could emerge if the stock undergoes some price adjustment. The company’s robust position in the AI hardware market and its strategic advancements in chip design suggest long-term growth potential, but timing the market entry is crucial for maximizing investment returns.
Image: Bigstock
Arm Holdings (ARM) Hits 52-Week High: What's Next for Investors?
Shares of Arm Holdings plc (ARM - Free Report) reached a 52-week high of $188.75 on Jul 9 before slightly dipping to close at $182.28.
This year, ARM shares have seen an impressive rise of 156%, significantly outpacing the industry’s 22% rally. The remarkable performance of the stock can be attributed to the ongoing excitement around advanced artificial intelligence (AI) software and the associated hardware. Moreover, investors in Arm are closely monitoring both the global and American economic landscapes.
Considering the persistent strength of ARM shares, investors might be wondering if now is the right time to invest in the stock. Let’s delve deeper into this question.
ARM and AI: Beyond the Frenzy
ARM leverages AI to develop sophisticated chip designs and software tools, which are utilized in smartphones, automobiles and data centers. Major semiconductor manufacturers like Apple (AAPL - Free Report) , NVIDIA (NVDA - Free Report) and Qualcomm (QCOM - Free Report) rely on ARM’s chip designs. The company provides foundational designs that its clients can further customize and develop.
The current enthusiasm for AI technologies has considerably boosted investor interest in companies like ARM that are involved in AI hardware. The positive market sentiment toward AI advancements has been a significant driver of ARM's stock performance.
However, the company’s strategic positioning within the AI ecosystem suggests a potential for sustained growth beyond the current AI excitement. Its advanced v9 architecture and power-efficient processor platforms have garnered attention from major industry players, enhancing ARM's competitive position in the semiconductor market. Additionally, its inclusion in the Nasdaq-100 Index within 10 months of its initial public offering underscores its growing significance in the global technology sector.
ARM had forecasted around 20% sequential growth in Royalty revenues for the fiscal first quarter, anticipating a higher adoption of v9, which typically commands double the royalty rates compared to Armv8 products. Royalty revenues have been boosted by the resurgence of the smartphone market and increased market share outside mobile.
Strong Top and Bottom-line Prospects
The Zacks Consensus Estimate for ARM’s fiscal 2025 earnings is pegged at $1.55, indicating 22.1% growth from the year-ago level. Earnings in fiscal 2026 are expected to increase 35.2% from the prior-year actuals.
The company’s sales are expected to increase 23.8% and 22.9% year over year, respectively, in fiscal 2025 and 2026.
Consider Waiting for a Better Entry Point
Given the stock’s substantial 156% increase over the past year, it may experience a correction soon. Currently, ARM is trading above its 50-day moving average, and the relative strength index indicates that the stock is in the overbought zone. Therefore, it might be wise for investors to wait for a potential correction.
ARM Stock Trades Above 50-Day Average
While ARM remains fundamentally strong, a more advantageous entry point could emerge if the stock undergoes some price adjustment. The company’s robust position in the AI hardware market and its strategic advancements in chip design suggest long-term growth potential, but timing the market entry is crucial for maximizing investment returns.
ARM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.