ARM's IPO: 25+ Wall Street Analyst Insights

Following its successful listing on the US stock market last month, ARM, a subsidiary of SoftBank, has garnered the attention of Wall Street's leading financial analysts. The analysts are now set to share their assessments of ARM as the post-IPO quiet period comes to an end.

Starting next week, analysts from over 25 prominent financial institutions, including Barclays, Goldman Sachs, JPMorgan, and Mizuho Financial Group, will initiate their comprehensive analysis of ARM. ARM entered the NASDAQ exchange last month with its IPO, which raised a substantial $4.87 billion, marking the most significant IPO since 2021.

In a report published on September 26th, Needham analyst Charles Shi commented, "ARM's robust control over the smartphone ecosystem and its resulting pricing authority can underpin its growth. However, challenges may arise when attempting to replicate this success in other technology sectors." The report further indicated that, given the valuation assessment during the IPO, there may be limited upward potential. The rating assigned to ARM in the report is "Hold."

Since ARM's listing on September 13th at an IPO price of $51 per share, its stock has witnessed a modest gain of around 2%. At the time of this report, ARM (ARM-US) ADR showed a 0.5% increase on Friday, October 6th, with each share trading at $52.77.

According to data compiled from international media sources, SoftBank Group continues to maintain a significant ownership stake in ARM. ARM's stock rating comprises one "Buy," three "Hold," and one "Sell," with an average target price of approximately $53 per share.

David Trainer, the CEO of New Constructs, has expressed the view that investors may be overestimating ARM's value and its potential for profit growth, thus perceiving ARM's stock as unattractive. He argues that ARM's IPO was priced too high and anticipates a potential significant long-term decline in its stock price.

In contrast, New Street Research analyst Pierre Ferragu has assigned ARM's stock an equivalent "Buy" rating, recently increasing the company's stock target price from $59 per share to $66 per share after revising upwards his expectations for ARM's 2025 royalty income by 20%.

It is worth highlighting that the ARM IPO, along with the IPOs of online grocery delivery firm Instacart (CART-US) and data automation platform Klaviyo (KVYO-US), serves as a significant gauge of investor interest in newly listed companies.

While all three companies enjoyed an initial surge in their stock prices during the early trading days, ARM and Instacart have faced challenges in sustaining those gains. ARM's current stock price is slightly above the IPO price but has, at times, dipped below it during trading, while Instacart fell below its IPO price on September 26th and has continued to experience a downward trend. These stock price dynamics may reflect a growing sense of investor caution.