Thread, article from Daily Telegraph Questor column:
You could well expect ARMfuls of black ink
STUDYING full-year figures for ARM Holdings yesterday proved a bit of light relief for computing analysts, who are more used to covering loss-making start-ups.
In seemingly no time at all, this Cambridge-based chip designer has emerged as a member of the FTSE 100, with grown-up profits and a growth record which even the most sceptical technology critic would find hard to ignore. Profits nearly doubled to a better-than-expected œ18m and sales grew 50pc to œ60m.
Of course, in a sensible market, this is the least you would expect of a company with a market capitalisation of œ15 billion but, when many rivals are still valued on a multiple of their customer numbers, let alone sales, the sight of all that black ink comes as a pleasant surprise.
It would be easy to conclude that the meteoric rise in ARM's share price is therefore over. Having begun to justify its phenomenal 460 times earnings multiple with some solid profit growth, the time has come to regard this as a relatively mature company and concentrate on the next big thing.
Certainly, ARM's competition is hotting up as other chip designers spot the potential in small portable computers, and the days of share prices doubling every month seem gone.
It would be a mistake, however, to assume that ARM lacks the capacity to electrify the market all over again. Its dominance of the mobile phone chip industry is an ideal springboard to design electronics for a whole new generation of portable gadgets from digital music players to computers that are woven into the fabric of our clothes.
Much of this science-fiction optimism is already in the share price at today's œ36.86, but, all the time ARM continues to pleasantly surprise even the most bullish analysts, there seems no reason not to expect more share growth (and the inevitable volatility) to come. Buy. |
