On a day when sellers gathered in a large crowd, it became difficult to tell where the enthusiastic buyers stood. A good earnings report from ARM Holdings (NASDAQ: ARMH) seemed to attract a portion of those looking to purchase stock. The British producer of low power chips used in mobile devices reported an increase of 28% in third quarter income. In dollar terms, the company realized $0.18 versus $0.14 per share during the same period last year. Earnings fell right in line with analysts’ expectations, but the top line number of $227 million did beat forecasts.
According to Warren East, CEO of ARM Holdings, the company enters the fourth quarter with a record backlog, which should translate into a strong quarter for licensing revenue. Analysts expect ARM Holdings to earn $0.19 for the coming quarter and $0.69 for the year. The question for traders and investors is to what degree will the slow down in the tech industry affect the company’s top and bottom lines.
Buyers queued up early to buy shares of ARM Holdings and the stock gapped $1.87 higher than yesterday’s closing price to start the session at $29.99. Like most American Depository Receipts (ADRs), the shares trade actively overseas and gaps are not uncommon since the opening prices in this country reflect trading action taking place in another part of the world. Shares of ARM Holdings, however, opened the session on wider gap than normal.
After the morning bell, share prices dipped a bit to an intraday low of $29.90. Buyers then turned up the juice and the stock steadily climbed through the lunch hour, reaching a daily and new yearly high of $31.89. Buyers quelled their enthusiasm as the close of the day drew near and share prices pulled back to $31.07 at the end of the trading day. The final tally showed the stock up $3.18 for a gain of almost 11%. Traders kept both hands busy as they swapped over 9 million shares. An average day sees 2 million shares exchanging hands.
Before today, ARM Holdings stock had traded as high as $31.55 eleven months ago. By mid-May, shares had slumped nearly 33%. In July, the stock traded for $21.64, a new 12-month low. On July 25, the company declared an interim dividend to holders of record on September 7. The current yield on the stock is roughly 0.5%. The news seemed to give share prices a lift and, on top of expected strong earnings, the stock has gained over 50% since the middle of the summer.
In addition to the dividend declaration, ARM also announced in July an extension of its collaborative effort with Taiwan Semiconductor (NYSE: TSM) for the delivery of ARMs processors for FinFet process technology.
Thirty-two analysts cover the company with 20 placing a “buy” rating on the stock. The consensus view has a $30.46 price target.
ARM Holdings designs microprocessors, physical intellectual property, related technology and software. The company licenses and sells its technology and products to electronic companies who in turn manufacture the products. ARM Holdings is based in Cambridge, UK, and was founded in 1998.
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