Potential Arm Deal Cancelation is a Net Positive for Nvidia (NVDA) - BofA

January 26, 2022 10:00 AM EST
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Following yesterday’s report on Bloomberg that Nvidia (NASDAQ: NVDA) is quietly working to abandon Arm acquisition, BofA analyst Vivek Arya sees this potential move as a net positive for the company.

The analyst believes Nvidia will be better off in channeling funds/equity reserved for Arm towards other growth endeavors in AI, Metaverse, gaming, autos and enterprise AI.

“In our view, if the headlines are true, it could be a net positive for NVDA in some scenarios, given: 1) The proposed deal faces considerable regulatory pushbacks; 2) NVDA does not need to own Arm to use Arm technology to expand in the data center; 3) Arm’s mature smartphone sales highly growth dilutive and likely not worth the $55-$60bn implied cash/stock value (equates to >20x EV/S); and 4) Even if deal were to be consummated it could have been a constant source of complicated royalty negotiations, several with NVDA’s competitors,” Arya wrote in a client note.

Overall, the analyst reiterated a Buy rating on Nvidia given the company’s “organic growth prospects which we find to be among the best in the sector with 20-25% topline growth and 25-30% EPS growth towards $10+ in EPS by 2025, up >2x from 2021.”

“We continue to believe that NVDA’s unique, and highly leverageable accelerated computing platform is best-positioned in the industry to take address several of the most, important, multi-decade secular growth opportunities,” Arya concluded.

By Senad Karaahmetovic | [email protected]

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