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ARM Holdings plc Slumps As Monitise Plc Surges On Billionaire’s Support

Microchip desiARM Holdingsgner, ARM Holdings (LSE: ARM) has seen its shares slump today, after the company issued a relatively upbeat third quarter trading statement. Indeed, the company reported that during the third quarter royalty payments rose 9%, compared to growth of only 2% during the second quarter. 

However, compared to the same period last year, ARM’s growth is slowing, as the company reported double-digit royalty growth of 13% during the third quarter of last year.

This year’s slower growth rate comes despite the company’s efforts to boost demand for its products — by giving free software to manufacturers of smart devices — in an attempt to cement ARM’s position in the market for the Internet of Things. 

Widespread worry 

ARM’s growth is slowing, which is why the company’s shares have fallen today. What’s more, recent comments made by ARM’s peer, Microchip Technology, about the state of the semiconductor industry have spooked already jittery investors.  

Specifically, Microchip believes that the semiconductor market is about to enter a cyclical downturn, which would put the brakes on ARM’s royalty growth. Unfortunately, as ARM’s shares currently trade at a forward P/E of 34, even after today’s declines, there’s little room for disappointment if sales do start to slow.

Billionaire backing 

Asmonitise ARM falls, AIM darling Monitise (LSE: MONI) is surging, after American billionaire Leon Cooperman spoke about his shareholding in the company on CNBC. 

As a former partner of Goldman Sachs, manager of a hedge fund with over $6bn of assets and one of the financial world’s most influential investors, the market pays attention to what Cooperman has to say.

So, when the billionaire mentioned that he hadn’t sold a single share in the company during the recent sell-off, the market took this as a vote of confidence in the company’s business model. Further, Cooperman actually tried to boost his stake recently by buying Visa’s stake in Monitise. Visa refused to sell at current prices. 

Cooperman really believes in Monitise’s technology and told CNBC that everyone who has taken at look at the company’s tech really wants to make use of it. Recent deals between Monitise, IBM and Santander have only reinforced Cooperman’s opinion that the company is a great investment. 

Long-term

Cooperman views Monitise as a long-term investment. The billionaire is well aware that these things take time and he’s prepared to wait. Indeed, as I’ve covered before, it took Visa over five decades to become the global payments behemoth that it is today. Monitise is expecting to become profitable by 2016, while increasing its number of users from the current level of 30m, to 200m by 2018.

For some, these numbers look ambitious based on Monitise’s recent performance, but with the help of tech giants such as IBM and banks like Santander, Monitise’s growth should accelerate over the next few years.

So, if you’re willing to wait, Monitise definitely has the potential to grow. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.