Analysts Upgrade ARM Holdings Fair Value Estimate

Despite five straight years of double-digit revenue growth from 2010 to 2014, analysts foresee another strong growth year from ARM in 2015, forecasting 20% sales growth

Brian Colello, CPA 19 February, 2015 | 2:54PM
Facebook Twitter LinkedIn

ARM Holdings (ARM) holds an extensive library of microprocessor intellectual property and has particular expertise in low-power high-performance chip architectures. ARM's IP is the backbone of most processors used in mobile devices today, and strong tailwinds from the shift to higher-end smartphones and the proliferation of connected devices as part of the Internet of Things should bode well for ARM in the years ahead.

ARM essentially develops the blueprints that allow a variety of leading chipmakers, such as Qualcomm, Apple, Broadcom, and Samsung, to design many of their semiconductors. Just as Intel's chips dominate the PC market, ARM-based chips are found in almost all handsets, where low power and longer battery lives are critical factors. In exchange for its IP, ARM collects both an up-front license fee and ongoing royalties based on the price of each ARM-based chip sold.

The source of ARM's wide economic moat, in our opinion, is intangible assets stemming from the firm's IP, as well as the strong ecosystem of partners around the ARM platform. ARM's licensees typically start with the firm's core IP and then modify these blueprints in order to differentiate their chips. Yet, all of these firms would have to make substantial reinvestments to build new architectures from scratch.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Brian Colello, CPA  is a senior stock analyst with Morningstar.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies       Modern Slavery Statement