Despite gains for many other chip stocks today, Arm Holdings (ARM +0.36%) stock is losing ground in Thursday's trading. The company's share price was down 4% as of 2:45 p.m. ET, according to data from S&P Global Market Intelligence.
Deutsche Bank published a new note on Arm before the market opened this morning. While analyst Ross Seymore issued a hold rating on the stock, he indicated expectations were high ahead of the company's upcoming earnings report and issued an eye-catching sales target.
Next week will be big for Arm stock
On July 31, Arm is scheduled to report earnings for the first quarter of its current fiscal year -- a period that wrapped at the end of June. Ross Seymore, Deutsche Bank's lead analyst on the stock, views the upcoming earnings release as a key valuation test for the semiconductor specialist.
Along with artificial intelligence (AI) and licensing momentum, the analyst thinks that continued growth in mobile and market share gains in the data center and automotive markets will power solid sales expansion for the company. On the other hand, Seymore maintained a price target of $82 per share on the stock. With shares currently trading at roughly $150, that would imply potential downside risk of 45% -- but Deutsche Bank noted it would reassess its valuation approach after earnings.
Will earnings results reignite Arm's incredible rally?
Arm has been one of this year's hottest chip stocks. Even with a recent pullback, the company's share price has surged roughly 102% across 2024's trading.
ARM PE Ratio (Forward) data by YCharts
Arm is valued at roughly 96 times this year's expected earnings and 40 times expected sales. Seymore expects that Arm will deliver sales and earnings results for the quarter and forward guidance that are in line with Wall Street's expectations, but a substantial sales, earnings, and guidance beat could be needed to power strong bullish momentum after the report.
