Bernstein estimates Arm IPO valuation at $40bn

Bernstein estimates the expected Arm IPO in 2023 will be valued at $40 billion, the firm's analyst Sara Russo said in a note Monday.

Russo said the IPO could occur as soon as September, with the range given between $30 billion and $70 billion. However, some reports suggest Arm may be looking for closer to $80 billion.

"Based on preliminary analysis, we reach a base case valuation of USD ~40B," wrote Russo. "Arm is the clear market leader in the semiconductor design IP market with 41% share in 2022 and twice the design IP revenues of second place Synopsis (SNPS, not covered)."

"We base our model and valuation on the limited financial information available from Arm historically, and more recently from Softbank (9984.JP, not covered), Arm's parent company since 2016," she explained.

The analyst stated that key considerations for the valuation included royalty rates and profitability, with R&D and SG&A as two specific focus areas.

"We believe a return to pre-Softbank levels for these two metrics is likely, and model in a measured return to those levels over the next few years. There could be upside from further improvement in SG&A, but we believe R&D levels are important to retain to support longer-term growth ambitions," Russo added.

By Sam Boughedda

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