ARM (NASDAQ:ARM) Shares Down 8% - Time to Sell?

Key Points

• Shares down 8%: ARM fell to about $198.65 (intraday low $195) on Tuesday with ~12.7M shares traded (73% above average), and the stock carries a high valuation (market cap ~$209.9B; P/E ~265) reflecting elevated growth expectations.
• Analysts are mixed but the consensus is a Moderate Buy with an average target of $174.83—below the current price—and individual targets range widely from Goldman Sachs' $125 (sell) to HSBC's $205 (buy).
• Insider selling: CEO Rene Haas and CFO Jason Child recently sold shares, and insiders have disposed of 83,712 shares (~$13.6M) in the past 90 days, a potential red flag for some investors.

Shares of ARM Holdings PLC Sponsored ADR (NASDAQ:ARM - Get Free Report) fell 8% during trading on Tuesday . The company traded as low as $195.00 and last traded at $198.65. 12,718,684 shares traded hands during mid-day trading, an increase of 73% from the average session volume of 7,332,343 shares. The stock had previously closed at $215.88.

Analyst Ratings Changes

A number of research firms have recently commented on ARM. Rosenblatt Securities reissued a "buy" rating and issued a $175.00 target price on shares of ARM in a report on Wednesday, March 25th. The Goldman Sachs Group increased their target price on shares of ARM from $110.00 to $125.00 and gave the stock a "sell" rating in a report on Thursday, April 9th. Morgan Stanley reissued an "equal weight" rating and issued a $150.00 target price (up from $135.00) on shares of ARM in a report on Tuesday, April 7th. HSBC raised shares of ARM from a "reduce" rating to a "buy" rating and increased their target price for the stock from $90.00 to $205.00 in a report on Friday, March 20th. Finally, Citigroup cut shares of ARM from a "buy" rating to a "hold" rating in a report on Tuesday, January 13th. Eighteen equities research analysts have rated the stock with a Buy rating, six have assigned a Hold rating and one has given a Sell rating to the company. According to MarketBeat, ARM has a consensus rating of "Moderate Buy" and an average target price of $174.83.

ARM Stock Down 8.0%

The company has a 50 day moving average price of $144.01 and a 200-day moving average price of $136.53. The company has a market cap of $209.88 billion, a price-to-earnings ratio of 264.87, a P/E/G ratio of 10.58 and a beta of 3.33.

ARM (NASDAQ:ARM - Get Free Report) last released its quarterly earnings data on Thursday, February 5th. The company reported $0.43 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.41 by $0.02. ARM had a return on equity of 14.01% and a net margin of 17.15%.The company had revenue of $1.24 billion during the quarter, compared to the consensus estimate of $1.23 billion. During the same quarter in the prior year, the firm posted $0.39 earnings per share. The firm's revenue was up 26.3% compared to the same quarter last year. On average, analysts forecast that ARM Holdings PLC Sponsored ADR will post 0.85 EPS for the current fiscal year.

Insider Activity at ARM

In other news, CEO Rene A. Haas sold 23,867 shares of the company's stock in a transaction that occurred on Wednesday, March 25th. The stock was sold at an average price of $161.17, for a total value of $3,846,644.39. Following the completion of the transaction, the chief executive officer owned 290,965 shares of the company's stock, valued at $46,894,829.05. This represents a 7.58% decrease in their ownership of the stock. The transaction was disclosed in a filing with the SEC, which is available through this hyperlink. Also, CFO Jason Child sold 21,280 shares of the company's stock in a transaction that occurred on Wednesday, March 25th. The shares were sold at an average price of $148.37, for a total value of $3,157,313.60. Following the completion of the transaction, the chief financial officer directly owned 174,706 shares of the company's stock, valued at $25,921,129.22. This represents a 10.86% decrease in their position. The SEC filing for this sale provides additional information. Insiders sold 83,712 shares of company stock valued at $13,614,730 in the last ninety days.

Institutional Trading of ARM

A number of institutional investors and hedge funds have recently added to or reduced their stakes in ARM. Capital Research Global Investors acquired a new stake in ARM during the 3rd quarter valued at approximately $243,098,000. Northwestern Mutual Wealth Management Co. increased its position in ARM by 2,623.5% during the 4th quarter. Northwestern Mutual Wealth Management Co. now owns 1,671,787 shares of the company's stock valued at $182,743,000 after purchasing an additional 1,610,403 shares during the period. Hyperion Asset Management Ltd acquired a new stake in ARM during the 3rd quarter valued at approximately $202,980,000. Employees Provident Fund Board acquired a new stake in ARM during the 4th quarter valued at approximately $120,241,000. Finally, SG Americas Securities LLC increased its position in ARM by 265.6% during the 1st quarter. SG Americas Securities LLC now owns 971,067 shares of the company's stock valued at $146,903,000 after purchasing an additional 705,459 shares during the period. Institutional investors and hedge funds own 7.53% of the company's stock.

About ARM

Arm Limited NASDAQ: ARM is a global semiconductor IP company best known for designing energy-efficient processor architectures and related technologies that underpin a wide range of computing devices. Founded in 1990 as a joint venture between Acorn Computers, Apple and VLSI Technology and headquartered in Cambridge, England, Arm develops the ARM instruction set architectures and core processor designs that chipmakers license and integrate into custom system-on-chip (SoC) products. The company operates a licensing and royalty business model rather than manufacturing chips itself.

Arm's product portfolio includes CPU core families (such as Cortex and Neoverse lines), GPU and multimedia IP (Mali), neural processing units (Ethos) and a suite of system and physical IP blocks.

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