Stocks Analysis by Investing.com (Thomas Monteiro) covering: Intel Corporation, Alphabet Inc Class A, Apple Inc, NVIDIA Corporation. Read Investing.com (Thomas Monteiro)'s latest article on Investing.com
ARM’s current valuation comes seven years after SoftBank took it private for $32 billion, and it represents a decrease from the previous evaluation of $64 billion, which SoftBank used to purchase the remaining 25% stake in the company from Vision Fund just last month.
During a presentation to investors last Thursday, Arm emphasized its growth prospects in various markets. In the cloud computing sector, where it currently holds a 10% market share, the company said it anticipates a robust 17% annual growth rate through 2025, partly driven by advancements in artificial intelligence.
First of all, Arm still needs to persuade investors that it possesses significant growth potential beyond its current dominance in the mobile phone market, where it commands an overwhelming 99% share. On the bright side, Arm’s royalty fees — a revenue stream that has been steadily building since its inception in the early 1990s — reached $1.68 billion, marking a significant increase from the previous year’s $1.56 billion.At $54.5 billion, Arm’s debut valuation seems too high, even for the expensive chip industry.
Comparatively, several competitors are achieving growth rates that surpass three times that of Arm, yet they are trading at more conservative multiples, typically ranging from 12 to 15 times their sales. Javier Correonero, an equity analyst at Morningstar, agrees the stock is too expensive at these levels:
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