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Arm Holdings (NASDAQ:ARM) shares fell more than 8% in premarket trading on Thursday after the chip designer issued a softer-than-expected fiscal 2026 first-quarter outlook.
Morgan Stanley analyst Lee Simpson, who has an Overweight rating and a $150 price target, noted that while the company's fiscal fourth-quarter results were solid, a sharp rise in operating expenses could weigh on near-term profitability. Arm's adjusted operating margin for the quarter came in at 52.8%, above the 50% midpoint of its sales guidance, despite a 11% year-over-year increase in operating expenses to $566 million.
Looking ahead, Arm guided for $625 million in Q1 operating expenses, indicating continued investment in its engineering base amid broader demand expectations, Simpson said.
J.P. Morgan analyst Harlan Sur trimmed his price target to $140 from $175, citing potential risks from key customers like Nvidia (NASDAQ:NVDA) moving to custom cores, which could impact Arm's royalty revenues.
Other firms, including Wells Fargo, HSBC, TD Cowen, KeyBanc, Rosenblatt, and Raymond James, also cut their price targets following the guidance.
Is ARM Stock a Buy?
Based on the one year price targets offered by 30 analysts, the average target price for ARM Holdings PLC is $139.31 with a high estimate of $202.00 and a low estimate of $75.34. The average target implies a upside of +12.18% from the current price of $124.19. For deeper insights, visit the Arm Holding Forecast page.
This article first appeared on GuruFocus.
