Arm is in demand on hopes for Christmas tablet sales and following an upbeat investor call.
Following Dixons upbeat comments about festive season electronic sales, the chip maker should benefit from demand for tablets and smartphones which use its designs.
On top of that, the company discussed the "internet of things" with analysts and investors on Wednesday, increasing some of its forecasts in the process. As a result its shares have added 16p to £10.43, up 1.5%.
According to analysts at EspÍrito Santo, Arm raised its expectations for embedded devices by around 12% to 29.8bn unit shipments in 2017 from 26.7bn. The increase is largely driven by the acceleration in adoption of "internet of things" - embedding sensors and communication devices into myriad different pieces of equipment and household items. Espirito said:
The adoption of cloud, mobile internet, app culture along with declining hardware costs are the primary drivers catalysing the adoption of "internet of things".
While Arm is likely to face competition from the likes of
We estimate that the revised addressable market forecasts imply a 2%-4% upgrade to 2017 earnings per share consensus . However internet of things is still an evolving market and the volumes could turn out to be significantly higher than current projections, in our view.
We remain bullish on Arm as an expanding addressable market, growing market share and increasing pricing imply that Arm can not only sustain but can potentially outpace its historical levels of growth in royalty revenues.
Indeed, we forecast royalty revenues to grow at a compound annual growth rate of around 24% from 2012-2017 compared to the 19% from 2007-2012. We believe that the migration to 64-bit architecture is a significant opportunity for 2014. Furthermore, the expansion into networking and internet of things add further legs to Arm's long-term growth story.
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