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.
ARM
Headquarters (founded) | Cambridge, England (1990) |
Market Cap | $21.1 billion |
Industry | Semiconductors |
Trailing-12-Month Revenue | $988.0 million |
Management | CEO Warren East Co-Founder/Chief Technology Officer Michael Muller |
Return on Equity (average, past 3 years) | 12.4% |
Cash/Debt | $881.8 million / $9.3 million |
Dividend Yield | 0.5% |
Competitors |
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.
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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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