Chip stock for artificial intelligence Arm positions (ARM) rose as much as 152% past a recent buy point. After this progress, is Arm stock a buy in today’s stock market?
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Arm stocks fell 31% last week, falling decisively below the key 10-week line for the first time since the December breakout. That’s a sell signal.
Shares rose 3.8% on Wednesday to trade around 99.70 per share. Arm stock remains about 40% off its 52-week high.
Arm IPO values company at $54.5 billion
In September, Arm Holdings went public on the Nasdaq and closed nearly 25% above the 51st offering price.
The Arm IPO priced 95.5 million shares at $51 each, which was the high end of the expected range of $45 to $51. That gave Arm an initial valuation of $54.5 billion. The IPO raised nearly $5 billion for majority shareholder SoftBank, which still owns 90% of Arm stock.
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Fundamental analysis of arm stock
Arm’s chip designs are used by every major semiconductor manufacturer, including Apple (AAPL), Qualcomm (QCOM), Nvidia (NVDA) and much more. Arm provides basic designs for the semiconductors produced by its customers. Chipmakers adapt these blueprints and build on them.
Arm focuses on four business segments: customer, automotive, data center and Internet of Things. Currently, the largest end markets are mobile devices and consumer electronics.
On Feb. 8, Arm said it earned adjusted earnings of 29 cents per share on revenue of $824 million in the quarter ended Dec. 31. Analysts polled by FactSet had expected earnings of 25 cents per share on revenue of $762 million. On a year-over-year basis, Arm’s revenues rose 32%, while sales rose 14%.
For the current quarter, Arm expects adjusted earnings of 33 cents per share on revenue of $875 million, based on the midpoint of its expectations. Analysts expect earnings of 20 cents per share on revenue of $779 million.
“More customers moving to higher value Arm v9 technology, combined with market share gains in cloud servers and automotive, resulted in strong royalty growth,” CEO Rene Haas said in a letter to shareholders.
He added: “The AI wave has driven licensing growth as these new devices require Arm’s powerful and energy-efficient computing platform.”
As a result of that fundamental strength, Arm stock has a best-possible EPS Rating of 99.
IBD’s proprietary Earnings Per Share Rating helps you quickly identify stocks with the strongest earnings performance. The EPS Rating takes into account the growth and stability of a company’s earnings over the past three years, with extra weight given to the most recent two quarters. The result is rated from 1 to 99, with 99 being the best.
Technical Analysis of AI Chip Stock
Arm shares are trading sharply below their 50-day moving average, an important level to watch and more than 40% lower than their 53-week high.
On February 12, Arm shares soared as much as 152% past a 64.92 cup-with-handle price. The shares initially broke out on December 8. Arm is on the IBD leaderboard.
Thanks to solid quarterly earnings growth in recent quarters and a strong price history, Arm stock has a perfect IBD Composite Rating of 99, according to the IBD Stock Checkup. The Composite Rating allows investors to easily gauge a stock’s fundamental and technical data.
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Is Arm Stock a Buy Now?
With the stock down more than 40% from its 52-week high and sharply below its 50-day line, Arm stock is not a buy right now.
Investors should wait until the stock definitively crosses the 50-day mark or moves past a proper buy point before purchasing shares.
For more leading stocks and stocks near a buy point, check out IBD’s stock lists, such as Stocks Near Buy Zones. To see the current trend in the stock market, check out IBD’s signature daily analysis, The Big Picture.
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Arm Stock falters as Google introduces an Arm-based data center processor
