Broadcom's Strong Performance and Analyst Ratings Drive Interest

Broadcom Inc. continues to impress investors with outstanding stock performance, driven by its expanding AI portfolio. Despite a slight decline in expected EPS for the fiscal year, analyst ratings remain overwhelmingly positive, suggesting strong future growth potential.

Date: 18-11-2024

AI Rating: 7

Broadcom Inc. (AVGO) is positioned strongly in the semiconductor industry, with a market capitalization of $769.9 billion. Its significant stock performance has been noteworthy, showing a 69% increase over 52 weeks, outperforming the broader S&P 500 Index's 30.4% rise.

Broadcom's price performance has been attributed to its rapidly expanding AI portfolio, contributing to a substantial demand for networking and custom ASIC chips. Specifically, the report notes that AVGO's AI-related revenue surged to $4.2 billion in fiscal 2023 and is anticipated to more than triple, exceeding $11 billion this year.

In its recent Q3 earnings report, AVGO posted an adjusted EPS of $1.24, exceeding Wall Street expectations despite a subsequent drop in its share price of over 10%. Revenue also surpassed forecasts at $13.1 billion, compared to the expected $12.9 billion. For the upcoming quarter ending in October, Broadcom projects revenue between $14 billion.

However, there is a decline expected in AVGO's EPS for the fiscal year, projected at $3.78, a 2.1% year-over-year decline. This indicates a mixed outlook regarding earnings, as the company's history of beating consensus estimates remains inconsistent, with successes in three of the last four quarters.

Despite the projected downturn in EPS, analyst sentiment remains robust. The consensus rating for AVGO stock is classified as a “Strong Buy”, based on 30 “Strong Buy” ratings along with three “Holds.” This position is slightly improved from two months prior.

Contributing to this optimism, UBS Group AG raised Broadcom’s price target from $170 to $200, sustaining a “Buy” rating. The mean price target of $195.71 indicates an 18.7% premium over current stock levels, while the highest target of $240 suggests potential growth of 45.6%.

Stocks: AVGO UBS