Arm Holdings (ARM) Implied Move Suggest Upside If Arm Chip Integral With AI Took Off

During ARM’s last quarter report in November, they have shown a poor performance, but we have since saw ARM shares climbed more than 15%. Moving forward, as Arm is pushing to expand its offerings to include chips integral to AI, automated vehicles, and cloud computing. This should give investors a positive outlook to look forward to.

Arm is well-known within the mobile phone segment, but they do not have the breadth into much hotter sectors that could provide income opportunity, but by making similar competitor growth stock, they would be able to include next-gen tech. This could make them in good stead for the future.

Technical is showing uptrend and we can see from the trading, it has been moving upwards, with some occasionally decline, but the price stay above 60. This might be a good potential to look at how Arm would be trading in pre-market.

There might be an opportunity to buy into.

ARM last reported earnings on 08 Nov 2023 after the market close (AMC). ARM shares declined -5.2% the day following the earnings announcement to close at 51.58. Following its earnings release, 90 days ago, ARM stock has drifted +41.5% higher.

From the time it announced earnings, ARM traded in a range between 50.57 and 79.94. The last price (72.98) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 9.1%. We could see an upside if Arm would be able to show the revenue from its chip integral to AI is working from the mobile phone manufacturers. We can see that there have been quite a few major mobile phone brand launches.

Is Arm participating in any of these major launches?

The options market overestimated ARM stocks earnings move 100% of the time in the last 1 quarters. The predicted move after earnings announcement was ±6.7% on average vs an average of the actual earnings moves of 5.2% (in absolute terms).

This suggest that Arm option valuation is overvalued, this might give us some price volatility but I would think more upside since there have been demand for chips with AI integration.

ARM's last earnings implied volatility (IV30) going into earnings was 48.5. The last time ARM released earnings, the implied volatility dropped to 37.3, resulting in an implied vol crush of 23%. 5 days after earnings, the 30 day IV was 36.0.

Average Implied Volatility Crush For ARM Earnings: 23%

Average 30 Day Implied Volatility 1 Day Before Earnings: 48.5

Average ARM 30 Day IV for the Day of Earnings: 37.3

Average 30 Day Implied Volatility 5 Days After Earnings: 36.0

Arm would give us a positive upside after its earnings if the demand for its services from the major mobile phone have increased, and most importantly, how is their sales for the chips integral to AI offerings?

I would be monitoring the price action closely in pre-market and actual trading, I think there might be a potential to trade.

Appreciate if you could share your thoughts in the comment section whether you think Arm would be able to surprise us with their sales on chips integral to AI?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.