UBS has raised its target price for chip designer ARM Holdings and reiterated its 'buy' recommendation.

"We believe ARM is in an excellent position to leverage many key themes in the digitisation occurring all around us, with ongoing robust smart-phone and tablet growth making way over time for growth in non-traditional markets like networking, the 'internet of things' and PCs/servers," the broker said on Tuesday morning.

The broker says that potential opportunities for the company include encouraging 'hold-out' customers into the ARM fold, penetrating new markets and providing the existing customer base with higher-value/royalty products.

UBS also said that, other than the outlook for the global economy, the key risk to ARM is the loss of a major account to Intel. Nevertheless, the broker said that "while news-flow will remain mixed (expect a Motorola-Intel device soon, and a Samsung-Intel Tizen phone over time), we see a major disruption as unlikely."

The broker reckons that its 2012/13 forecasts are prudent but has raised its longer-term estimates (2016 earnings per share forecasts raised by 6%) due to higher estimates for networking, microcontrollers and licensing growth.

The target price is raised from 645p to 750p. The shares are trading at 26 times 2014 earnings, slightly below its historical average multiple of 27.

Shares were up 0.62% at 552.39p by 11:25.

BC

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