Benitez wanted to assess Armstrong’s talents in pre-season, before deciding over whether or not to loan the youngster out.
However, the 19-year-old has suffered a knee injury - and he is still not back in full training.
And Benitez said: “With him we have a problem. It’s a good problem, though.”
Armstrong was sent out on loan last season, and he managed to score 20 goals for Coventry City in League One.
Newcastle fans are desperate for the starlet to be handed a chance, but it seems that he could head out on loan again.
The Magpies have brought in Dwight Gayle this summer, meaning that competition for places up-front is high.
“It’s always difficult with the competition, especially when you are a young player,” Benitez added.
“For me as a manager, if you ask me what do you prefer? I prefer local players but they have to be good enough to compete at the maximum level. The top sides have the best Academies but still they need to bring in foreign players.
“The main thing is to give him the opportunity to show his level. If we think the best thing is to send him away to keep developing, then we will do that.”
If Armstrong is sent out on loan, it is likely to be to a Championship club, rather than a League One team.
Wolverhampton Wanderers have previously been tipped to be interested in the England youth international (Chronicle).