Wells Fargo cut its price target on Arm Holdings to $255 from $280 while keeping an Overweight rating, citing valuation compression across the semiconductor sector. The stock trades at $191.80, down 16% over the past week.
Wells Fargo adjusted its fiscal 2029 valuation multiples to 68 times price-to-earnings and 50 times enterprise value-to-EBITDA. Arm currently trades at a P/E ratio of 195.
The firm raised revenue estimates for Arm to $6.14 billion for fiscal 2027, $8.19 billion for fiscal 2028, and $10.53 billion for fiscal 2029, compared with prior estimates of $6.00 billion, $7.88 billion, and $10.19 billion. Wells Fargo initiated fiscal 2030 revenue estimates at $13.2 billion.
Arm's second-quarter fiscal 2027 results were mixed. License revenue was stronger while royalty performance lagged. Wells Fargo increased confidence in AGI supply compared with 90 days ago, though Arm provided no update to its $1.1 billion revenue target.
License revenue grew 50% year-over-year, beating Barclays' 32% estimate. Royalty revenue grew 8%, weaker than Barclays' 14% estimate. Goldman Sachs reiterated a Sell rating with a $160 price target, citing royalty weakness. HSBC lowered its price target to $215 from $230, keeping a Hold rating. Barclays adjusted its price target to $325 from $360, maintaining Overweight, due to margin pressures.
Arm management expressed increased confidence in achieving up to $2 billion in artificial general intelligence CPU customer demand. The company releases earnings on November 4.