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Intel Corporation Message Board

  • wallisweaver wallisweaver Feb 13, 2013 9:56 PM Flag

    61% Downside Ahead For ARM Holdings

    [Don't miss Ashraf's informative article as he identifies quite a few of the sharp pointy objects that the ARM Bubble is descending towards. I think his evaluation of the stock value at $16.80 is a bit high but it's in the ballpark...]

    Conclusion

    ARM's stock is in a bubble that is set to burst as soon as the signs that the major growth spurt that it experienced as smartphones ramped fade very quickly over the next year or two. The earnings/revenue growth will slow substantially, and with the advent of competitive pressures from Intel, it is unlikely to maintain a monopolistic position in the smartphone/tablet space for much longer. Further, the server opportunity, should it prove to be more than a mirage, will add next to nothing to the top and bottom lines, as the unit volumes are simply nowhere near what they are in the spaces that ARM is traditionally used to competing in. Finally, as insiders continue to sell out of their positions, it will eventually dawn on the buyers that they have been sold an overpriced, overinflated, and over-hyped stock.

    At Qualcomm's or TSMC's valuation of roughly 20x earnings, ARM -- based on FY2013E projected earnings, is worth roughly $16.8/share, implying 61% downside. Given that the highest analyst price target is $50/share, and further, given that the stock has tried and repeatedly failed to hold above $44, 15% optimistic, hype-driven upside for over 60% of very real, numbers-based downside seems like a near no-brainer short sale at these levels.

    Sentiment: Strong Buy

 
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