On Thursday, Rosenblatt Securities increased the price target for Broadcom Limited (NASDAQ:AVGO) shares to $1,650 from the previous target of $1,500, while reiterating a Buy rating on the stock.
The firm acknowledged Broadcom's robust performance in the April quarter, which was attributed to significant progress in the integration of VMWare and the transition to an annual subscription model, advancements in AI networking, and the development of custom acceleration ASICs.
Broadcom experienced seasonal trends within the wireless sector, whereas the server storage and broadband sectors are still in search of a cyclical bottom. Despite these fluctuations, Broadcom's management has confidently revised the fiscal year 2024 sales forecast upwards to $51 billion from the prior $50 billion estimate. This adjustment is backed by a more optimistic outlook for VMWare and sustained growth in AI.
The semiconductor company aims to increase the proportion of its semi-sales to 40%, a notable rise from the previous goal of over 35%. This target adjustment is seen as conservative by Rosenblatt Securities, given Broadcom's impressive doubling in growth for its switching products, including Tomahawk 5 and Jericho 3, and similar expansion in the market for PCIe switches and network interface cards (NICs).
Broadcom has also announced ongoing development of a next-generation accelerator ASIC, which is anticipated to be adopted by tech giant Google (NASDAQ:GOOGL). Additionally, the timing for the release of next-generation 1.6 Tbit switches has been confirmed.
While there is keen investor interest in the competitive landscape between Broadcom's custom ASICs and Nvidia (NASDAQ:NVDA)'s GPUs, the analyst firm views the comparison as imbalanced, suggesting that both technologies have distinct market opportunities and are likely to prosper.
In the realm of Ethernet switching, Broadcom faces competition from Nvidia, which is deploying Ethernet and Infiniband solutions. Despite this, Broadcom's management remains unfazed, drawing confidence from over two decades of dominance in the Ethernet market.
Broadcom's strategic approach to AI at scale, which emphasizes distributed computing and networking rather than just computing power, further solidifies its position in the industry.
The reiteration of the Buy rating and the increase in price target to $1,650 reflects Rosenblatt Securities' positive outlook on Broadcom's strategic execution and market prospects.
In other recent news, Broadcom Limited has been the focus of several analyst adjustments, following robust revenue growth in the second quarter of fiscal year 2024. The company's consolidated net revenue reached $12.5 billion, marking a 43% increase year-over-year. A significant portion of this surge is attributed to Broadcom's AI revenue, which soared by 280% to $3.1 billion.
UBS, an investment firm, maintained a Buy rating on Broadcom, raising the shares target to $1,735 from $1,610, citing the company's strong performance and potential for further financial growth. Another firm increased Broadcom's price target to $2,050.00, attributing the adjustment to stronger AI trends that are offsetting weaknesses in non-AI sectors.
Broadcom's integration of VMware (NYSE:VMW) has exceeded initial expectations, contributing $5.3 billion, up 175% year-over-year. Despite declines in server storage connectivity and broadband revenues, Broadcom anticipates over $11 billion in AI revenue for fiscal year 2024 and expects a modest recovery in server storage connectivity in the latter half of the year. These recent developments underscore Broadcom's robust growth in key areas, particularly AI.
InvestingPro Insights
As Broadcom Limited (NASDAQ:AVGO) garners attention with its upwardly revised fiscal year 2024 sales forecast and strategic market positioning, investors may benefit from additional insights. According to real-time data from InvestingPro, Broadcom's market capitalization stands at a robust $693.05 billion, underscoring its significant presence in the industry. The company's P/E ratio is currently at 54.42, reflecting a premium valuation that investors are willing to pay for its earnings, potentially due to the company's consistent growth and market leadership. Moreover, with a revenue growth of 12.94% in the last twelve months as of Q1 2024, Broadcom demonstrates its ability to expand its financial top line amidst a dynamic market environment.
Two key InvestingPro Tips that investors may find particularly relevant are that Broadcom has raised its dividend for 14 consecutive years and analysts anticipate sales growth in the current year. These factors not only highlight Broadcom's commitment to shareholder returns but also suggest a positive outlook on its future revenue streams. For those interested in a deeper analysis, InvestingPro offers additional tips, including insights on Broadcom's valuation multiples and its performance relative to industry peers. To access these insights and more, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 17 additional InvestingPro Tips available, investors can make more informed decisions backed by comprehensive data and expert analysis.
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