Why Shares of Arm Holdings Are Rising Today
Key Points
UBS hiked its price target on Arm stock.
Analysts often have shorter investing horizons than the multiyear holding periods that long-term investors favor.
Shares of Arm are trading at a high valuation, so investors may want to consider other options for semiconductor exposure.
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When analysts wax bullish about stocks, investors often sit up and take notice. That's exactly what's happening today with respect to Arm Holdings (NASDAQ: ARM) stock. Shares of the semiconductor stock are jumping higher today after UBS provided a more auspicious outlook.
As of 3:32 p.m. ET, shares of Arm are up 4%, having retreated slightly from their earlier gain of 7.3%.
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UBS touts the tension regarding tariffs is tapering off
Keeping a buy rating, UBS raised its price target on Arm stock to $200 from $175. The firm predicates this rosier outlook on the recognition that how tariffs may affect the smartphone supply chain are softening, according to The Fly.
Of the various products in which Arm's semiconductors are found, smartphones are one of the most reliant technologies on Arm's chips. The company estimates that 99% of smartphones, for example, include Arm's components.
Based on Arm stock's closing price of $170.68 on Friday, the $200 price target from UBS implies upside of 17.2%.
Arm stock will cost you an arm and a leg
Before tech investors leap at the opportunity to buy Arm stock, it's important to recognize a couple of things. For one, analysts often have shorter investing horizons than the multiyear holding periods that The Motley Fool favors, so it's best to take the $200 price target from UBS with a grain of salt.
Secondly, Arm stock is hardly a bargain. Trading at about 263 times trailing earnings, shares of Arm are richly valued right now. Consequently, investors looking for semiconductor stocks -- and who are interested in more reasonable valuations -- may want to look elsewhere, or consider a semiconductor exchange-traded fund.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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