JPMorgan upgrades ARM to "overweight" with future revenue growth expected to exceed 20%
1min read Morgan Stanley published a research report, giving Arm Holdings (ARM.US) a "overweight" rating, with a target price of $140. The stock has risen 84% so far this year.
The bank's analysts Harlan Sur and Peter Peng said Arm appeared to be in all the right end markets, leading their team and investors to believe the semiconductor company's revenue growth rate would exceed 20% in the next few years.
Arm produces key hardware for the data center, smartphone, PC client, industrial, IoT and automotive segments, focusing on accelerating computing and artificial intelligence.
"All these factors are reflected in the strong growth of renewal/additional license value and the improvement of future patent rates/penetration rates in all end markets," Harlan Sur and Peter Peng said.
The bank said, "For example, in the cloud/data center market, its ARM CPU architecture has a high adoption rate on multiple AI/general server CPU platforms."
The bank estimated Arm's share in the cloud/data center server market was 15% last year, 20% this year and 50% in 2020.
Sur noted, "Our 'overweight' rating is based on Arm's strong leadership in computing architecture in semiconductors, which can well exploit the growing demand for high-performance computing capabilities while optimizing energy efficiency."