In what is set to be the biggest US float of the year, the chip designer is expected to seek a valuation of up to $190 billion as it tries to cash in on the rise in artificial intelligence.
Hours before Arm’s initial public offering filing landed in the US, investors were scrutinising a handful of reported financial metrics for clues on whether the lofty valuation the company is said to be seeking for its shares makes sense., Arm is expected to seek a valuation of between $US60 billion and $US70 billion , as the British chip designer seeks to cash in on investors’ frenzy for stocks that can benefit from the rise in artificial intelligence.
That is based on the $US2.68 billion of revenue from Arm’s latest financial year. A representative for Arm declined to comment.That range jibes with what analysts at Bernstein Research suggested last month, when they wrote in a note that the company should be worth about $US40 billion.
But those ratios plunge when comparing share price to expected earnings for the next year. If using an average blended forward price-to-earnings ratio across Nvidia, AMD, Synopsys and Cadence, then Arm would need to generate $US1.1 billion of income to justify a $US40 billion valuation, or about $US1.7 billion for a $US64 billion value.The difficulty in forecasting revenue makes valuing the company hard.
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