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ARM Holdings plc Message Board

  • analysis101vp analysis101vp Mar 8, 2013 10:56 AM Flag

    Is ARM stock way ahead of itself?

    Are its current valuations justified?
    Given the growth estimates, which could easily be challenged by Intel's new products in the next 2 years,
    obviously it's way overvalued.
    But how about the past 3 months.
    While its estimates have been trimmed for 2013 EPS from 0.87 down to 0.85,
    the stock price has risen $5 or 13%.
    That fact alone does not make sense at all.
    Even if expectations are to be met or slightly beat with ARM holding strong to the mobile market,
    the stock needs to at least come back down to around $37 in the near term. Like now.

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    • ARM's valuation is built on two pillars; 1) The assumption that ARM & Windows RT would conquer a meaningful share of the Windows market and a future 64 bit ARM product will conquer the server market, and 2). Intel would pose no serious threat to ARM in mobile.

      However, In less than one quarter Windows RT is already comatose and the chances of ARM mounting a serious challenge to Intel's server market is even less likely. Further, Intel's Clovertrail Plus using older 32nm technology is already challenging the best mobile ARM products shipping today and vastly better Intel products will be arriving by Q4, which will itself be replaced by vastly better 14nm products by mid 2014.

      The overwhelming evidence of Intel's assault on ARM cannot be ignored.

      • 2 Replies to merlot_1
      • I think even if you assume that ARM is going to control most of the small device market for the next 2 years, you have to at least admit that Intel is going to get some share of ARM's market. That market growth is BTW no longer 45 percent per year but more like 27-28 percent. ARM is priced out at 40 percent growth and that just isn't there even if you ignore Intel totally as a threat. No one in the industry is taking the ARM server thing serious. It may have a niche market at best not enough to make up for the shortfall in the mobile market.

        Sentiment: Strong Sell

      • ARM's valuation is built on two pillars; 1) The assumption that ARM & Windows RT would conquer a meaningful share of the Windows market and a future 64 bit ARM product will conquer the server market, and 2). Intel would pose no serious threat to ARM in mobile.

        However, In less than one quarter Windows RT is already comatose and the chances of ARM mounting a serious challenge to Intel's server market is even less likely. Further, Intel's Clovertrail Plus using older 32nm technology is already challenging the best mobile ARM products shipping today and vastly better Intel products will be arriving by Q4, which will itself be replaced by vastly better 14nm products by mid 2014.
        ----

        Assumptions? If you think RT and 64 bit server chips are driving the growth story then you don't understand the story...

        As for Clovertrail Plus, from a CPU perspective, It'll be lucky to beat the (40nm) Tegra 3 on Geekbench...

    • I would say even if the earnings estimates come to pass for ARMH the stock looks to be worth no more then 30. I would say the stock is at least 25% overvalued.

 
ARMH
38.45+0.83(+2.21%)Feb 12 4:00 PMEST