Arm Stock Has 20% Downside, According to 1 Wall Street Analyst

Core Viewpoint - Arm Holdings' stock has surged 8% following its fiscal year 2024 earnings report, but investment bank Bernstein argues that buying the stock post-earnings was a mistake, labeling it as overpriced and recommending a sell [1][3]. Financial Performance - Arm's fiscal 2024 sales increased by 21% to $3.2 billion, while net income fell by 43% to $0.29 per share [2]. - The fourth quarter showed significant momentum, with revenue rising by 47% and earnings increasing from $0.00 per share to $0.21 per share year-over-year [2]. - Management has guided for approximately 22% sales growth in fiscal 2025, with non-GAAP earnings expected to grow similarly to about $1.55 per share [2]. Valuation Concerns - Bernstein noted that while Arm's guidance was considered "strong," it did not exceed expectations and lacked the "beat and raise" that investors were hoping for [3]. - The stock is trading at an extraordinary valuation of 388.5 times trailing earnings, which Bernstein argues does not justify the anticipated 22% growth rate [3]. - Bernstein has raised its price target to $92 but maintains a sell recommendation, emphasizing that Arm's stock is significantly overpriced [3].