ARM (NASDAQ:ARM) Shares Gap Down - Should You Sell?

Key Points

• ARM shares gapped down sharply, opening at $206.75 versus the prior close of $228.77, while trading volume reached roughly 1.75 million shares.
• Despite the decline, analysts maintain a “Moderate Buy” consensus, with an average price target of $303.32; ratings include 18 Buys, seven Holds, one Strong Buy and one Sell.
• ARM reported quarterly results above expectations, with $0.45 EPS and $1.29 billion in revenue, up 22.4% year over year. However, the stock carries a high valuation, including a P/E ratio above 210, and its CFO sold $3.12 million worth of shares under a pre-arranged trading plan.

Arm Holdings PLC Sponsored ADR (NASDAQ:ARM - Get Free Report)'s stock price gapped down prior to trading on Friday. The stock had previously closed at $228.77, but opened at $206.75. ARM shares last traded at $208.0590, with a volume of 1,751,637 shares traded.

Wall Street Analysts Forecast Growth

Several research analysts recently weighed in on the company. Royal Bank Of Canada lowered their price objective on ARM from $475.00 to $340.00 and set an "outperform" rating for the company in a research report on Thursday, July 30th. Wells Fargo & Company reduced their price target on shares of ARM from $350.00 to $280.00 and set an "overweight" rating on the stock in a research report on Thursday, July 30th. Piper Sandler assumed coverage on shares of ARM in a report on Wednesday, September 9th. They set an "overweight" rating and a $320.00 target price on the stock. Benchmark started coverage on ARM in a report on Thursday, July 16th. They set a "hold" rating for the company. Finally, Bank of America reissued a "neutral" rating and issued a $335.00 target price (up from $245.00) on shares of ARM in a report on Thursday, July 30th. One analyst has rated the stock with a Strong Buy rating, eighteen have issued a Buy rating, seven have issued a Hold rating and one has assigned a Sell rating to the stock. According to data from MarketBeat.com, the company presently has an average rating of "Moderate Buy" and an average target price of $303.32.

ARM Price Performance

The stock's 50-day moving average is $259.62 and its 200 day moving average is $227.44. The stock has a market cap of $217.74 billion, a price-to-earnings ratio of 210.59, a P/E/G ratio of 7.00 and a beta of 3.78.

ARM (NASDAQ:ARM - Get Free Report) last issued its earnings results on Thursday, July 30th. The company reported $0.45 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.40 by $0.05. The business had revenue of $1.29 billion during the quarter, compared to the consensus estimate of $1.26 billion. ARM had a return on equity of 12.24% and a net margin of 20.25%. The company's revenue for the quarter was up 22.4% on a year-over-year basis. During the same period in the prior year, the business posted $0.35 EPS. Analysts anticipate that Arm Holdings PLC Sponsored ADR will post 1.15 EPS for the current year.

Insider Transactions at ARM

In other ARM news, CFO Jason Child sold 10,400 shares of the stock in a transaction on Monday, September 21st. The stock was sold at an average price of $300.00, for a total value of $3,120,000.00. Following the completion of the transaction, the chief financial officer owned 153,442 shares in the company, valued at approximately $46,032,600. This represents a 6.35% decrease in their ownership of the stock. The transaction was disclosed in a legal filing with the SEC, which can be accessed through this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan.

Institutional Inflows and Outflows

Several institutional investors and hedge funds have recently added to or reduced their stakes in ARM. Focus Financial Network Inc. grew its holdings in shares of ARM by 0.9% during the third quarter. Focus Financial Network Inc. now owns 4,686 shares of the company's stock worth $1,357,000 after buying an additional 40 shares in the last quarter. GAMMA Investing LLC lifted its stake in shares of ARM by 18.7% during the second quarter. GAMMA Investing LLC now owns 406 shares of the company's stock valued at $144,000 after buying an additional 64 shares during the period. Allworth Financial LP lifted its stake in shares of ARM by 2.9% during the second quarter. Allworth Financial LP now owns 2,269 shares of the company's stock valued at $804,000 after buying an additional 65 shares during the period. MCF Advisors LLC lifted its stake in shares of ARM by 11.7% during the second quarter. MCF Advisors LLC now owns 764 shares of the company's stock valued at $271,000 after buying an additional 80 shares during the period. Finally, SteelPeak Wealth LLC boosted its position in ARM by 11.0% during the third quarter. SteelPeak Wealth LLC now owns 931 shares of the company's stock worth $270,000 after acquiring an additional 92 shares during the last quarter. 7.53% of the stock is currently owned by institutional investors and hedge funds.

About ARM

Arm Holdings plc NASDAQ: ARM is a semiconductor and software design company that develops central processing unit (CPU) architectures and related intellectual property. Rather than manufacturing chips itself, Arm licenses its designs and instruction-set architectures to semiconductor companies and technology manufacturers, which incorporate them into their own products.

The company's offerings include CPU processor cores, graphics processing units through its Mali product family, system IP, development tools and software.

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