Arm Holdings Is Overvalued If Aggressive Tech Spending Isn't Sustained

Nov. 17, 2024 8:36 AM ETArm Holdings plc (ARM) Stock
Oliver Rodzianko profile picture
Oliver Rodzianko
2.28K Followers
(9min)

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.

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Dilok Klaisataporn

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

This article was written by

Oliver Rodzianko profile picture
2.28K Followers
Oliver Rodzianko is an investment analyst specializing in the technology sector, grounded in timeless value principles. His expertise spans AI, semiconductors, software, and renewable energy, with a focus on companies that demonstrate resilient management and lasting competitive advantages. A trusted voice in financial analysis, Rodzianko’s insights are frequently highlighted as 'Must Reads' on Seeking Alpha, syndicated to Forbes via GuruFocus, and published on TipRanks. He seeks value-driven growth investments offering reliable and ethical returns, combining traditional fundamental analysis with modern proprietary tools.

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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