Why ARM Holdings Is Poised to Pull Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, microprocessor designer has received a distressing two-star ranking.

With that in mind, let's take a closer look at ARM and see what CAPS investors are saying about the stock right now.


Headquarters (founded)

Cambridge, England (1990)

Market Cap

$21.1 billion



Trailing-12-Month Revenue

$988.0 million


CEO Warren East

Co-Founder/Chief Technology Officer Michael Muller

Return on Equity (average, past 3 years)



$881.8 million / $9.3 million

Dividend Yield



Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 11% of the 915 members who have rated ARM believe the stock will underperform the S&P 500 going forward.

Earlier this month, one of those Fools, Gainster, succinctly summed up the ARM bear case for our communtiy:

I don't want to be overly pessimistic, but the facts are overwhelming, ARM is extremely overpriced, they lost the single technological advantage they had, they are competing with Intel that has a major brand and an enormous R&D budget. The mere fact that a phone needs two CPU's, tells us that the world is ready for something more powerful and Intel is ready to deliver.

Based on an assumption that the P/E has to go down to around a more reasonable level of 20, then the share price should go down to a quarter of the current share price. Further there will be some earnings losses, which will push down the price further down.

Thanks to its two-star rating, ARM may not be your top choice. Fortunately, The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the brand-new free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.

The article Why ARM Holdings Is Poised to Pull Back originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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