Free Trial

ARM Holdings' Stock Meteoric Rise: Is It a Buy or Overbought?

Arm is displaying new innovations at the Hannover Messe.

Key Points

  • ARM Holdings (NASDAQ: ARM) has surged 131% year-to-date, recently breaking its all-time high with solid momentum.
  • Despite solid earnings growth, the stock appears overbought, with a high P/E ratio of 610 and an RSI of 85.
  • Inclusion in the Nasdaq-100 and strong performance in the semiconductor sector have fueled its recent rise.
  • 5 stocks we like better than ARM

As ARM Holdings NASDAQ: ARM continues its impressive climb, market participants, be they investors, traders, or speculators, increasingly wonder if the stock's rapid rise is sustainable or has surged too quickly. 

ARM Today

Arm Holdings plc stock logo
ARMARM 90-day performance
+4.25 (+2.68%)
(As of 04:02 PM ET)
52-Week Range

Since its successful NASDAQ debut in September last year, the stock has shown remarkable performance, recently breaking above its all-time high (ATH) with solid momentum. So, let's take a closer look at the company's recent performance, fundamentals, and technical indicators to evaluate whether it's still a buy or if caution is warranted.

ARM Holdings: Innovators in CPU Architecture and Development

Arm Holdings plc architects, develops, and licenses central processing unit (CPU) products and related technologies for semiconductor companies and original equipment manufacturers. It offers various products, including microprocessors, graphics processing units (GPUs), and multiple systems intellectual property (IPs). 

These products find applications across numerous markets, such as automotive, computing infrastructure, consumer technologies, and the Internet of Things. Arm operates globally, with significant markets in the United States, China, Taiwan, and South Korea.

ARM Outperforms NVIDIA and Market Sector

Since its NASDAQ debut in September last year, following a successful IPO, Arm's stock has shown remarkable performance. The stock has surged, boasting a 131% year-to-date increase. It has recently experienced an impressive rally, climbing nearly 60% this month alone.

This surge has outperformed its sector and the overall market, surpassing the performance of industry giant NVIDIA NASDAQ: NVDA in recent months. With the stock up over 20% this week, closing in on a $200 billion market capitalization,  and achieving a new all-time high, investors are questioning whether it is overbought or if it remains a good buying opportunity.

Technical Analysis: Is ARM Stock Overbought?

On a technical analysis basis, ARM appears overbought. Just two months ago, it was trading under $100, but now it is at all-time highs with a Relative Strength Index (RSI) of 85, indicating overbought territory. This rapid ascent raises questions about the move's sustainability. Several factors have contributed to this momentum in the short term.

ARM is in a sector that is currently outperforming the market—the semiconductor sector. Over the past month, the sector has surged, with the SMH ETF up over 20% this month and leading the overall market. Another factor contributing to ARM's impressive performance is the stock's inclusion in the Nasdaq-100 Index, announced last week, replacing Sirius XM Holdings, which has provided a significant boost.

Latest Earnings Report: ARM Exceeds Analysts' Estimates

Fundamentally, some metrics suggest that ARM might be overvalued at current levels. For instance, its current P/E ratio is 610, and its forward P/E is 85, indicating a hefty premium. Despite these high valuations, ARM has demonstrated solid earnings performance. In its most recent earnings report on May 8, 2024, the company reported earnings of $0.36 per share, exceeding analysts' consensus estimates of $0.30 by $0.06. Additionally, ARM generated $928 million in revenue for the quarter, beating estimates of $865.94 million and showing a 46.6% increase compared to the same quarter last year.

Arm Holdings plc (ARM) Price Chart for Friday, July, 19, 2024

Navigating ARM's Stock Performance: Growth vs. Valuation Concerns

ARM Holdings has exhibited impressive strength and momentum, with its stock price reaching new heights. The semiconductor sector's overall bullish trend and the recent Nasdaq-100 inclusion have undoubtedly contributed to its rise. However, caution is warranted given the high P/E ratios and RSI indicating overbought conditions. 

While ARM's fundamentals show strong earnings growth, the current valuations suggest that the stock might have gone too high too quickly. Investors should closely monitor the stock's performance and consider both technical signals and fundamental metrics before making further investment decisions.

Should you invest $1,000 in ARM right now?

Before you consider ARM, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and ARM wasn't on the list.

While ARM currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

Beginners Guide To Retirement Stocks Cover

Click the link below and we'll send you MarketBeat's list of seven best retirement stocks and why they should be in your portfolio.

Get This Free Report
Ryan Hasson
About The Author

Ryan Hasson

Contributing Author

Technical Analysis, Momentum Trading, Risk Management

Like this article? Share it with a colleague.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
0.606 of 5 stars
0.61 / 5 stars
Compare These Stocks  Add These Stocks to My Watchlist 

Featured Articles and Offers

Recent Videos

3 Top Market Leaders Splitting Their Stocks
How to Navigate Stock Downgrades
CPI News Breakdown: Key Market Moves to Follow

Stock Lists

All Stock Lists

Investing Tools

Calendars and Tools

Search Headlines