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  • wallisweaver wallisweaver Feb 13, 2013 10:02 PM Flag

    61% Downside Ahead For ARM Holdings As Lofty Expectations Meet Harsh Reality

    [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...]

    Sentiment: Strong Buy

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    • Ashraf' writes well but his articles are riddled with inconsistencies and errors. In this latest one he confuses royalty and licence revenues and thinks ARM 64 bit is just an ISA extension. He also skips over important changes in the IP world, such as the (sad) demise of MIPS, ARM's main competitor in the CPU IP space. The end of MIPS happened with the rise of the ARM's share price over the last few months (which is a better argument than his East speaks view). MIPS also gives us an idea of what ARM's IP assets are worth (it's patents) and more importantly it's sped up the adoption of the new ARM 64 ISA with architecture licences from key MIPS customers, Broadcom and Cavium. He also skips over other important aspects of ARM's business such as the physical IP business (Artisan) and what this means for the future.

      I may share his ARM 'overvalued' view, but the reality is that the bulk of his arguments are flawed.

      • 1 Reply to theblueredmonk
      • 'and thinks ARM 64 bit is just an ISA extension.'

        What is it more than that ? Are you referring to the doubling of the usable registers from 16 to 32, well x86 did that too going from 8 to 16 so Atom has that in its pocket too.

        'such as the (sad) demise of MIPS, '

        Only the current company is gone, the MIPS ISA is still alive and well under Imagination Technologies control now who will probably make better use of it, I really don't see any connection with ARMH's rise. Broadcom and Cavium are also not stopping making MIPS processors.

    • 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.

      • 1 Reply to wallisweaver
      • 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.

    • Fine pompous shill, we got your message for the umpteenth time. Why don't you diversify? Go to the ARMH message board and bash the stock there, and for the first time in your pathetic prognostication history assign a "strong sell" sentiment to ARMH.

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