UBS has upgraded its rating for chip designer ARM Holdings from neutral to buy, saying that the stock now offers ‘quality at a reasonable price’.

‘ARM’s analyst day provided a useful reminder that ARM has substantial opportunities to further penetrate the semi [conductor] industry and it is comforting that using management expectations and assuming market growth of 3-5% into our model would result in c130p of upside to our valuation,’ the broker said.

‘ARM remains one of the highest quality ways to invest in the, still emergent, theme of digitisation.’

While there are some short-term risks – ‘both from the macro driven semis cycle and the perception that Intel will dominate Windows products across various form factors’ – UBS says that nothing fundamental has change with solid long-term drivers for ARM.

Now trading in line with its historical average, the broker now recommends to buy to stock and, reflecting a lower tax charge long term, has lifted its target price from 620p to 630p.

By 11:02 on Friday morning, ARM was trading 0.97% higher at 500p.

BC