Arm Holdings is Monday's IBD 50 Growth Stocks To Watch pick as it forms a handle on a cup base. Arm stock was added to the PHLX Semiconductor Sector Index list of 30 chip companies listed in the U.S., effective Friday.
The company designs architecture, chips and software tools used by leading tech names including Apple, Alphabet, Qualcomm, Microsoft and Taiwan Semiconductor.
Its artificial intelligence technology and components are used in smartphones, data centers, automotive and Internet of Things devices. The company boasts its chips are found in more than 280 billion devices.
Arm Holdings ranks No. 4 out of 39 stocks in the Electronics-Semiconductor Fabless group, which holds the No. 49 spot out of the 197 industry groups followed by Investor's Business Daily. The stock also is on the IBD Tech Leaders list.
Arm Stock Forms A Handle
Arm stock hit an all-time high on July 7, but reversed sharply lower several days later to start a new base. The stock fell below its 50-day moving average in late July and tested its 200-day moving average.
Arm stock has climbed from the bottom of the cup base, although volume has been lighter than average. Shares have formed a full cup-with-handle base with a 149.93 buy point and reclaimed the 50-day line. The stock is around 5% below the entry.
Its relative strength line has been volatile and is trending sideways and could use improvement. Still, the stock has gained 89% so far this year and outperformed 95% of stocks, according to its 95 IBD Relative Strength Rating.
Arm stock began trading on Sept. 14, 2023, at 51 a share.
Profits Look To Pick Up After A Dip
Arm Holdings beat fiscal first-quarter earnings and sales estimates on July 31. But Arm stock fell as investors focused on its current quarter and fiscal 2025 earnings outlook that disappointed.
The company's profit grew 67% on 39% revenue growth in its most recent quarter. Current-quarter estimates show earnings falling 29% then bouncing back for a 16% increase and 59% gain in the following two periods.
Analysts forecast flat sales for its fiscal second quarter, then increases of 14% and 38% over the next two quarters. Profit projections call for a 24% bump in 2025 and 32% in 2026.
Mutual funds have bolstered their positions of Arm stock, with 543 owning shares in June, up from 387 in March. IBD Mutual Fund Index component Fidelity Contrafund increased its holding in June.
Arm stock holds a best-possible Earnings Per Share Rating of 99 from IBD, along with a Composite Rating of 95.
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