Arm Holdings (NASDAQ:ARM) is an exciting company that many in the technology industry look past too often. However, it has gained a substantial following of dedicated investors, which has driven its stock price to likely unsustainable levels. Indeed, without continued, recurring and
Arm Holdings Is Overvalued If Aggressive Tech Spending Isn't Sustained
Summary
- Arm's EV-to-EBITDA ratio is unsustainably high, implying a -10.43% annual decline in enterprise value by 2029 based on conservative growth and valuation forecasts.
- Even in an optimistic case with aggressive advanced technology growth, a 20% 10-year revenue CAGR and 15x EV-to-sales terminal multiple only suggest a fair valuation, leaving no margin of safety.
- Despite strong intellectual property and market positioning, Arm's current valuation outpaces its fundamentals. Probability favors a medium-term decline; a Moderate Sell rating is warranted.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMZN either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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