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Business News/ Companies / All eyes on SoftBank subsidiary Arm Holdings IPO as quiet period nears end
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All eyes on SoftBank subsidiary Arm Holdings IPO as quiet period nears end

Arm, which is majority owned by SoftBank, currently holds one buy rating, three holds, and one sell. Data compiled by Bloomberg indicates an average price target of about $53.

So far, analysts who aren’t beholden to the so-called quiet period are generally cautious on Arm. (Photo: AP)Premium
So far, analysts who aren’t beholden to the so-called quiet period are generally cautious on Arm. (Photo: AP)

Major analysts from leading Wall Street banks are set to provide their insights on one of the most closely watched initial public offerings in the United States this year, Bloomberg reported. Arm Holdings Plc successfully raised $4.87 billion last month, marking the largest IPO on a United States exchange since Rivian Automotive's $13.7 billion offering in November 2021.

Starting from the upcoming week, analysts at over 25 firms, including Barclays Plc, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Mizuho Financial Group Inc., all of which were involved in the IPO, will have the opportunity to commence coverage of the chip designer.

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Since its IPO at a price of $51 on September 13, shares have seen an increase of approximately 6 percent. On Friday, shares rose nearly 3 percent, closing at $54.08.

Arm, which is majority owned by SoftBank Group Corporation, currently holds one buy rating, three holds, and one sell. Data compiled by Bloomberg indicates an average price target of about $53.

Analysts express caution

Up to now, analysts not bound by the so-called quiet period have generally expressed caution regarding Arm.

Also Read: China Evergrande's EV unit suspends $500 million share subscription deal, stock to resume trading

Needham analyst Charles Shi, who holds a "hold" rating on the company, stated in a note dated September 26, "We believe the company's strong control over the smartphone ecosystem and resulting pricing power can drive growth, but it may encounter challenges when seeking to replicate its success in other technology sectors. Considering our evaluation of fundamentals, we believe the IPO price reflects a full valuation, and we anticipate limited upside from this point."

David Trainer, the CEO of New Constructs, suggested to Bloomberg said that investors might be overvaluing Arm and overestimating its potential for profit growth. Trainer rates the stock as unattractive, stating, "It was a very overpriced IPO, so I think this is probably long-term going to end up a lot lower."

Pierre Ferragu from New Street Research is the sole source of a buy-equivalent rating on Arm, as per the report. Recently, on Thursday, Ferragu increased his price target on the company to a Street-high of $66 from $59. This adjustment followed a 20 percent boost in his estimate for the company's 2025 royalty revenue.

Also Read: Air travel back to pre-pandemic levels, but new challenges ahead

Investor caution apparent

The IPOs of Arm, online grocery-delivery firm Instacart Inc., and data automation platform Klaviyo are regarded as indicators of investor interest in newly-public companies.

Although all three experienced gains on their first day of trading, Arm and Instacart have encountered difficulties in sustaining those initial increases in price. Arm is currently trading slightly above its IPO price and has at times fallen below that level during the trading day. Instacart slipped below its IPO price on September 26 and has seen further declines since. This price movement suggests a potential increase in investor caution.

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Published: 09 Oct 2023, 07:03 AM IST
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