UPDATE: FBR Capital Markets Initiates Coverage on ARM Holdings plc with Outperform Rating, $62 PT on Unique Value Proposition

In a report published Thursday, FBR Capital Markets analyst Christopher Rolland initiated coverage on

with an Outperform rating and $62.00 price target. In the report, FBR Capital Markets noted, “ARM's products offer a unique value proposition allowing hundreds of customers, through the payment of license fees and royalties, access to power-efficient processor architecture and IP. Therefore, the “ARM collective” essentially shares in the development costs of the technology, allowing niche semiconductor design firms to compete in markets previously influenced by insurmountable development costs and economies of scale. The business model, along with the low-power benefits of the ARM architecture, has been transformational in the rise of the fabless semiconductor model, which we believe poses a disruptive threat to today's largest semiconductor incumbents. Indeed, the industry has found a new standard, and ARM should benefit through outsized growth in license and royalty revenues over the next decade. Overall, we believe ARM has priced its technology inexpensively, effectively accelerating ecosystem growth and driving critical mass. In addition to higher volumes, as the complexity of systems on a chip (SoCs) naturally grows, ARM should successfully extract a higher royalty rate by providing next-generation technologies that quickly become the new table stakes for the industry (64-bit, big.LITTLE, and others). We are initiating coverage of ARMH with an Outperform rating and a $62 price target, or 37x (adjusted for cash) our 2015E EPS, lofty but appropriate in our view given the high quality and expected growth in earnings.” ARM Holdings plc closed on Wednesday at $48.58.