ARM, whose chip designs are used in Apple’s iPhone and iPad, rose Friday after the company beat market expectations. ARM is particularly benefiting from the surge in iPhone 4S sales, which analysts believe brings in almost double the royalties per unit as previous models. Licensing growth also has been buoyed by more tech manufacturers choosing to license ARM’s technology.
ARM’s royalty revenue is growing faster than the industry rate, and the company is gaining share in its target markets. ARM also has been boosted by increasing inclusion of its chip designs into other devices, from washing machines to smart cards. Best known for its low-power chips used in small, portable devices, ARM also is entering into laptops and servers.
Accumulate ARMH shares below our $31 “buy under” price.