Big Wall Street brokerages, including J.P.Morgan and Goldman Sachs, started coverage of Arm Holdings with their top ratings a month after its blockbuster market debut, expecting the chip designer to deliver strong revenue and earnings growth.

However, since the British company surged almost 25% on its debut on the Nasdaq on Sept. 14, its stock has drifted to ultimately close at $54.08 on Friday, compared with its initial public offering (IPO) price of $56.10.

The IPO had 30 underwriters, all of whom had to wait until Oct. 9 to start coverage as required by industry practice.

J.P.Morgan, Citigroup and Goldman Sachs all started coverage of the stock with "buy" ratings and expect it to hit $60-$70 by December next year, betting on continued growth in Arm's chip designs, which power nearly every smartphone in the world.

J.P.Morgan analyst Harlan Sur expects Arm to record more than 18% revenue and 40% earnings per share (EPS) compounded annual growth rate (CAGR) for the next three years on higher intellectual property (IP) content and market share gains.

Sur set a $70 price target, expecting Arm to beat both the brokerage's and the market consensus estimates over the next year.

Deutsche Bank, which also rates the stock a "buy", said Arm's revenue growth should accelerate due to "idiosyncratic" drivers such as higher royalty rates and market share gains.

That, along with margin expansion, should attract investors, the analysts said.

HSBC, however, was more cautious, assigning the stock a "hold" rating, citing Arm's relatively high exposure to the mature smartphone end-market and their expectations that the stock will remain range-bound.

So far, at least 11 brokerages cover Arm, as per LSEG data. Their mean rating is "buy" and median price target is $60.

Arm currently trades at 46.7 times its forward earnings, as per LSEG data.

  - Reuters