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New Street Research says reported Arm Holdings valuation is 'attractive'

EditorRachael Rajan
Published 06/09/2023, 12:42 am
© Reuters

New Street Research analyst Pierre Ferragu said in a research note Tuesday that the reported Arm Holdings (ARM) IPO range is an "attractive valuation."

Reuters reported over the weekend that SoftBank (TYO:9984) is considering listing Arm at a $50 billion to $54B valuation. This is down from last month's $64B valuation that saw SoftBank acquire a 25% stake it did not already own in the company from its Vision Fund.

New Street has a $64B valuation target for Arm, while it sees the company reaching a valuation of $82B in September 2026.

"We value Arm at ∼$82bn early 2027, or 27x forward royalty revenues. This is a 6-turn premium over the SOXX forward EBIT multiple, similar to where it was in 2016," said Ferragu. "Discounted back 15% p.a. to September 2024, this corresponds to $62bn valuation, which would be our 1-year target price."

New Street believes the "Royalty multiple is the most sensible valuation multiple for Arm."

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