Risk Warning

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Prime Markets in the Press - Arm Holdings (ARM)

16/02/2011

ARM is the global leader in the development of semiconductor intellectual property. The firm licenses its technology to a network of partners, which use ARM's designs to create low-energy chips for use in electronic devices. For each chip sold, ARM receives a royalty.
Although ARM was one of the best-performing stocks in the FTSE 100 last year, we believe that the stock still has considerable upside potential. The company's processors can be found in more than 95 per cent of mobile phones and the shift towards more complex smartphones will continue to benefit royalties.

In addition, ARM has begun to make inroads in the laptop and netbook markets, where Intel has been dominant. Microsoft announced that future generations of its Windows operating system will support ARM-based chips. Given the lower cost and greater efficiency of ARM's chips, we believe the company is poised to gain market share.

It is undeniable that ARM's stock appears expensive on a number of valuation metrics; however we believe these do not capture its unique qualities. Consensus estimates still do not fully appreciate the potential earnings growth driven by strong license sales and royalties growth.

ARM Holdings
622.5p -28.5p
Scotsman says BUY


BROKER SNAPS:

RICHARD Curr, head of dealing at Prime Markets, thinks directories publisher Yell is using a "fundamentally-flawed model" and reiterated his "sell" rating. Curr added: "With major boardroom changes accompanying every results announcement, there is absolutely nothing to recommend Yell shares."

Yell
8.85p -1.06p
Broker says SELL


ARDEN Partners said that supermarket chain Morrisons' acquisition of online baby products retailer Kiddicare came at a "relatively modest price" of about £70 million when compared to Kiddicare's sales. The broker said: "This looks like a good little deal for Morrisons, massively supportive of our 'buy' view."

Morrisons
280p +5p
Broker says BUY

 

The Scotsman

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