13th Apr 2015 09:49
LONDON (Alliance News) - Liberum reiterates its Sell rating on ARM Holdings with a price target of 700 pence, saying that whilst the company is well managed and has a "stellar track record", it cannot justify its current valuation.
Liberum says that ARM's valuation is pricing in a "monopoly it can never get." "If ARM were to get 100% share of all available markets we believe it is worth 1,080 pence," but this is 6% below its current share price, Liberum says.
For this to happen, US semiconductor giant Intel would have to "cease to exist", Liberum notes, and all other competing architectures would have to be discarded, which it believes is an almost impossible scenario.
Shares in ARM are trading down 1.2% at 1,156.00 pence Monday morning.
Ahead of ARM's first quarter results next week, Liberum says it expects the results to be boosted by the weaker sterling.
Whilst on average ARM's key customers will decline 9% quarter-on-quarter in the first quarter of 2015, Liberum expects ARM's royalty revenue to outperform due to the adoption of its higher royalty V8 chip. As a result, Liberum expects a 6% quarter-on-quarter royalty decline for ARM, although this would be up 25% year-on-year.
"ARM's key customers are seeing mixed fortunes. Apple is doing well, as is Samsung LSI as it takes a greater share at Samsung Mobile. On the other hand, Qualcomm appears to be losing share, MediaTek has hit a soft patch and Marvell's mobile business is missing expectations," Liberum says.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
ARM.L