On Friday, Bernstein SocGen Group increased the stock price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) to $250 from the previous $195 while maintaining an Outperform rating for the stock. The adjustment follows Broadcom's recent financial performance and future revenue projections, particularly in the field of artificial intelligence (AI).
According to InvestingPro data, Broadcom's stock is trading near its 52-week high of $186.42, with an impressive year-to-date return of 63.59%. The company maintains a strong market position with a market capitalization of $843.79 billion.
Broadcom's recent quarterly report revealed a sequential decline in wireless revenue and a miss on overall semiconductor forecasts for the first quarter. Despite these challenges, the company's management strategies have managed to preserve overall revenue guidance. The preservation is attributed to a software revenue pushout and support from AI networking for near-term AI revenues.
InvestingPro analysis indicates the company has achieved substantial revenue growth of 32.04% over the last twelve months, with a robust gross profit margin of 74.71%. While currently trading above its Fair Value, Broadcom shows strong financial health with an overall score of "GREAT" based on comprehensive metrics available in the Pro Research Report.
The company's management also provided a three-year outlook, suggesting a potential AI revenue opportunity ranging from $60 billion to $90 billion from existing customers by 2027. This projection indicates a significant upside compared to current expectations for Broadcom's AI business.
Furthermore, the possibility of additional growth is on the horizon with two new potential customers currently in discussions, though not yet contributing to revenue. InvestingPro subscribers can access 15+ additional exclusive insights about Broadcom, including its dividend consistency record and long-term return metrics, crucial for evaluating such ambitious growth projections.
The second half of the year is expected to see a considerable ramp-up in XPU ASIC production on new 3nm products, which is anticipated to bring unit growth and potentially higher average selling prices (ASPs). This prospect, along with the robust AI narrative, has led to an updated model and raised estimates by Bernstein SocGen Group.
In light of these developments, the firm has adjusted its multiple from 30x to 33x, reflecting confidence in Broadcom's stronger AI story and the resulting increase in the price target. The Outperform rating indicates the analyst's positive outlook on the stock's future performance.
In other recent news, Broadcom Limited has seen a significant adjustment in its price targets from multiple financial firms following its recent earnings report. Mizuho (NYSE:MFG) Securities raised its price target to $245, citing the firm's robust growth trajectory and the strong revenue outlook for Artificial Intelligence (AI) by Fiscal Year 2027.
Morgan Stanley (NYSE:MS) also increased the stock's price target to $233, emphasizing Broadcom's solid results and exposure to AI. BofA Securities and Evercore ISI raised their price targets to $250, highlighting the company's growth in the custom-chip AI sector and the acquisition of two additional hyperscale customers for its XPU business.
Broadcom's AI revenue is expected to continue its strong performance, with the January quarter's guidance at approximately $3.8 billion, suggesting the possibility of exceeding $50 billion in revenue by Fiscal Year 2027. The company's financial outlook is robust, with industry-leading gross margins and operating margins forecasted at 77% and 64% respectively for Fiscal Year 2025.
Broadcom's AI business, catering to three current hyperscale customers, estimates a serviceable available market (SAM) of approximately $60-90 billion by fiscal year 2027. Analysts' outlook suggests a trajectory of approximately 15% sales growth and 20% EPS growth over the next three years for Broadcom, supported by a diversified base across both silicon and infrastructure software sectors. These recent developments reflect the company's strong performance and potential growth in the AI sector.
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