Arm Holdings Receives Positive Analyst Ratings as Spotify Faces Downgrade
Arm Holdings Initiates Coverage with Strong Buy Ratings
A number of Wall Street firms have recently initiated coverage of Arm Holdings (NASDAQ:) with buy-equivalent ratings. Analysts from Goldman Sachs, Citi, Jefferies, Guggenheim, Deutsche Bank, and Mizuho Securities are optimistic about the company’s prospects following its successful market debut. Arm Holdings, backed by SoftBank (OTC:), is expected to experience robust growth in both revenue and earnings. Goldman Sachs, for example, predicts a three-year compound annual growth rate (CAGR) of 16% for revenue and 36% for non-GAAP EPS. Citi also believes that Arm Holdings will maintain its dominance in the semiconductor market, leading to faster sales growth and higher valuation. Rosenblatt, with an optimistic price target of $85, sees Arm Holdings benefiting from strong growth trends in edge computing, AI, automotive, and IoT.
Spotify Downgraded Amidst Margin Expansion Concerns
Shares of Spotify (NYSE:) fell over 2% pre-market after Redburn-Atlantic downgraded the company to Neutral from Buy. The brokerage cited concerns about margin expansion due to the potential dilution caused by Spotify’s new audiobook offer. Redburn-Atlantic estimates that the rollout of this offer in the UK, Australia, and the US could significantly impact gross margin. Despite positive revisions in subscriber numbers and average revenue per user (ARPU), the brokerage reduced its 2025 EBIT estimate by 8%. This downgrade could also invite competition from Amazon, further delaying Spotify’s profitability.
On Holding Upgraded, Splunk Downgraded, Zscaler Receives Positive Rating
On Holding (NYSE:) saw its shares rise over 1% pre-market after Baird upgraded the company to Outperform from Neutral. Baird’s confidence in On Holding’s brand health and upcoming growth drivers, along with its valuation, drove the upgrade. Williams Trading also upgraded On Holding last week.
Meanwhile, Evercore ISI downgraded Splunk (NASDAQ:) to In Line from Outperform, reducing its price target. Barclays, on the other hand, upgraded Zscaler (NASDAQ:) to Overweight from Equalweight and raised its price target. Barclays cited the growth potential in Secure Access Service Edge (SASE) as a key driver for the upgrade, positioning Zscaler as a leader in the SASE sector.
In conclusion, Arm Holdings receives positive buy ratings from several Wall Street firms, while Spotify faces a downgrade due to concerns about margin expansion. On Holding experiences an upgrade, while Splunk faces a downgrade. Zscaler receives a positive rating due to its growth potential in the SASE sector.
