What's Going On With Arm Holdings Stock?

Arm Holdings Plc ARM shares are trading lower Tuesday, pulling back after staging an impressive rally following last week’s earnings results. Here’s what you need to know.

What Happened: After closing up another 29% on Monday, Arm shares had nearly doubled since the company reported a blowout quarter last week.

Arm beat analyst estimates on the top and bottom line in the fourth quarter and issued strong guidance. The company said it has room to increase prices of some of its product offerings and noted that it plans to expand into new markets due to AI demand.

"Arm delivered another quarter of record revenues driven by continued adoption of the world’s most pervasive compute platform," said Rene Haas, CEO of Arm Holdings.

“More customers moving to higher-value Armv9 technology combined with market share gains in cloud server and automotive resulted in strong royalty growth. The AI wave drove licensing growth as these new devices require Arm’s performant and power-efficient compute platform."

Several analysts raised price targets on the stock following the print and shares ripped higher on above-average volume as investors raced to get exposure to another potential AI darling.

SoftBank acquired Arm in 2016 for $32 billion and took the company public last year in what was the biggest IPO of 2023. Softbank still owns approximately 90% of the chip designer’s outstanding shares. Next month, Arm’s 180-day post-IPO lockup is set to expire.

Is ARM A Good Stock To Buy?

An investor can make a few decisions when deciding whether a stock is a good buy. In addition to valuation metrics and price action which you can find on Benzinga's quote pages – like ARM Holdings‘s page for example – there are factors like whether or not a company pays a dividend or buys a large portion of its stock each quarter.

These are known as capital allocation programs. Arm does not pay a dividend, but obviously has a few ways it can return value to shareholders. Feel free to search Benzinga's dividend calendar for the next company that is due to pay a dividend and determine what kind of yield you can earn for holding a share of the company.

For example, if you're looking to earn an annualized return of 20.52%, you'll need to buy a share of Herzfeld Caribbean Basin by March 26. Once done, you can expect to receive a nominal payout of $0.14 on May 10.

Buyback programs are obviously different and highly variable. A company can approve a buyback program and purchase shares as it sees fit over the course of time in which the buyback was authorized. Looking through the latest news on ARM Holdings will often yield whether or not the company has approved a buyback program recently. Buyback programs usually serve as a support for share prices, serving as a backstop for demand.

ARM Price Action: Arm shares closed Monday up 29.3%. The stock was down 12.6% at $130.18 Tuesday morning, according to Benzinga Pro.

Photo: Wikimedia Commons.