Long-Term Position in ARM - Rearm or Disarm?
ARM Long-Term Analysis
Hey!
Today we're looking at Arm Holdings plc, ticker $ARM. They just put out some numbers, and while the growth is definitely there, the market seems to have gotten way, way ahead of itself on the stock price. Plus, the company itself is sounding a bit cautious about the next few months. Let's see what the numbers tell us.
If you prefer to listen, scroll down to the Members Only section for a podcast about this episode.
Quick Summary (TL;DR) 📝
Main Point: ARM's stock is priced for absolute perfection, floating up in the stratosphere, but the company's own outlook for the near future is much more down-to-earth.
Business Model: 🟩🟩 (They're the architects for essential chip tech, great model)
Recent Financials: 🟩 (Strong growth, record last quarter)
Balance Sheet Health: 🟩🟩 (Zero debt – you love to see it!)
Valuation (Stock Price vs. Earnings): 🟥 (Dangerously expensive right now)
Company Guidance/Outlook: 🟨 (They're being cautious, worried about tariffs)
Growth Drivers: 🟩🟩 (AI is their big ticket, plus new tech designs)
Risks: 🟥 (Valuation, too much hope pinned on AI, tariffs, tough competition, and a big owner who could sell)
Chart Technicals: 🟨 (A bit messy – not a clear runway for takeoff right now)
Breaking Down the Business 🏗️
So, what does Arm actually do? Think of them like the architects for the crucial parts of the chips in your phone, your smart TV, and even your car's dashboard computer. They design the core technology – the CPUs (the main brain), GPUs (for graphics), and NPUs (for AI tasks).
Here’s the clever bit: Arm doesn't actually make or sell the physical chips. Instead, they license out their designs. Companies like Apple, Samsung, Nvidia, and Qualcomm pay Arm a fee to use these blueprints (that's the licensing revenue). Then, for every single chip one of these companies makes and sells using Arm's tech, they pay Arm another small fee (that's the royalty revenue). It’s a brilliant model because they design it once and can get paid for it millions, even billions, of times.
Why does this matter? Arm's designs are known for being super power-efficient. That's why they totally dominate the mobile phone market – your phone battery wouldn't last long otherwise! Now, that same power efficiency is making their designs really attractive for data centers and AI, where companies are desperate to save on electricity bills and keep things cool.
One more thing: Arm is about 88% owned by SoftBank, a giant Japanese investment company. This is important, and we'll come back to it.
85% of the article left
Read on for my bespoke graphs, detailed analysis, entry points, and complete trading strategy with exact support/resistance levels.