Investors in Arm Holdings stock have witnessed a rollercoaster ride in recent times. Initially, the stock soared on the back of impressive fiscal 2024 third-quarter results, buoyed by the surging demand for artificial intelligence (AI) chips, which are integral to Arm’s business model. Moreover, subsequent quarterly reports and guidance left some investors disappointed, leading to a 27% decline in the stock since its peak in February.
However, despite short-term fluctuations, Arm Holdings remains a significant player in the semiconductor stock industry, particularly benefiting from the increasing demand for AI chips. Here’s a step-by-step guide on how to Invest in Arm Holdings Stock.
How to Invest in Arm Holdings Stock
Step 1. Choose a Brokerage: Before investing in Arm Holdings stock, select a reliable brokerage platform that suits your investment needs. Consider factors such as commission fees, ease of use, and available features. Platforms like eToro offer zero-commission trading, fractional shares, and access to global markets, making them suitable for investors of all levels.
Step 2. Open a Brokerage Account: Sign up for an account with your chosen brokerage platform. Provide necessary personal information and complete the registration process. Platforms like eToro offer a simple and straightforward account opening procedure, enabling you to start investing quickly.
Step 3. Fund Your Account: Deposit funds into your brokerage account using a preferred payment method. Most platforms support various funding options, including bank transfers, credit/debit cards, and electronic wallets. Ensure that you have sufficient funds to initiate your investment in Arm Holdings stock.
Step 4. Analyze Arm Holdings Stock: Conduct a thorough analysis of Arm Holdings stock before making investment decisions. Evaluate key metrics such as price-to-earnings ratio, revenue growth, and market trends. Utilize research tools and resources provided by your brokerage platform to gain insights into the company’s performance and outlook.
Analyzing Arm Holdings Stock
When analyzing Arm Holdings stock, investors can leverage various tools and metrics to gain insights into its current state and future potential. Here’s a breakdown of key metrics and the current state of Arm Holdings stock:
- Price-to-Earnings Ratio (P/E Ratio): The P/E ratio is a fundamental metric used to evaluate a company’s valuation relative to its earnings. As of the latest available data, Arm Holdings has a relatively high P/E ratio of 375, indicating that investors are willing to pay a premium for the company’s future earnings potential.
- Revenue Growth: Arm Holdings has demonstrated robust revenue growth, driven by increasing demand for its chip designs and intellectual property licensing. In fiscal 2024, the company reported a 47% year-over-year increase in revenue, highlighting its ability to capitalize on emerging trends such as artificial intelligence (AI) chips. Furthermore, Arm’s guidance for future revenue suggests a continued upward trajectory, with expectations of a 33% year-over-year increase in the upcoming quarter.
- Future Earnings Projections: Despite recent market volatility and investor sentiment, Arm Holdings has maintained optimistic earnings projections, signaling confidence in its long-term growth prospects. The company’s guidance for fiscal 2025 anticipates a 22% increase in revenue and a significant uptick in earnings, driven by continued adoption of its AI-focused chip designs and strategic partnerships with chipmakers.
- Stock Performance: Arm Holdings stock has experienced significant volatility in 2024, with a notable increase of 70% from $65 to $115 in just five months. This sharp rise reflects investor optimism surrounding the company’s growth potential and its position in the semiconductor industry.
Step 5. Execute Your Purchase: Once you’ve analyzed Arm Holdings stock and decided to invest, place an order through your brokerage platform. You can choose between a market order, which buys or sells at the current market price, or a limit order, which sets a specific price for execution. Consider your investment strategy and risk tolerance when selecting the order type.
Step 6. Track Your Investment: Monitor the performance of your investment in Arm Holdings stock regularly. Use features like watchlists and price alerts provided by your brokerage platform to stay informed about market movements and company updates. Adjust your investment strategy as needed based on changing market conditions.
Should You Buy Arm Holdings stock?
Investing in Arm Holdings can be attractive for growth-oriented investors seeking exposure to the semiconductor industry, particularly in the AI chip segment. Despite recent stock price fluctuations, the company has demonstrated strong revenue growth driven by increasing demand for its intellectual property and chip designs. With a solid pipeline of licensing agreements and a focus on AI-driven innovation, Arm Holdings has the potential to deliver long-term value to investors.
Is Arm Holdings Profitable?
The core of Arm’s business lies in licensing its chip designs and architecture to third-party chipmakers, who then integrate Arm’s intellectual property into various devices, including smartphones, computers, and data center processors. With the rising demand for AI chips, Arm has seen a notable uptick in licensing agreements, particularly for its Arm Total Access (ATA) agreements, which provide comprehensive IP support to chipmakers.
Moreover, the transition to Arm’s latest architecture, Armv9, fueled by the AI boom, is expected to drive future revenue growth. Armv9 offers higher royalty per chip compared to previous architectures, contributing to the company’s record royalty revenue in the last quarter.
While market volatility and competitive dynamics may impact short-term performance, Arm Holdings’ solid financial foundation and market leadership position bodes well for its long-term profitability prospects.
Final Thoughts
In conclusion, investing in Arm Holdings stock offers exposure to the growing AI chip market and the company’s innovative technology ecosystem. By conducting thorough research, assessing market conditions, and considering your investment objectives, you can make informed decisions about investing in Arm Holdings stock.
Also read: Best AI Stocks to Buy in 2024