On Thursday, Evercore ISI increased its price target on Broadcom Limited (NASDAQ:AVGO) shares to $2,010 from the previous $1,620, while maintaining an Outperform rating on the stock.
The firm's optimism is rooted in Broadcom's recent quarterly report, which surpassed revenue expectations by 4% and earnings per share (EPS) by 1%. Following the report, Broadcom updated its annual revenue forecast to $51 billion, a 2% hike from earlier projections.
The firm's confidence in Broadcom is bolstered by the company's addition of two new custom AI silicon customers, which are expected to provide a reliable revenue stream in the processor segment. This development, coupled with the growing traction of Broadcom's Ethernet solutions in AI data centers, underscores the company's strong position in the burgeoning AI market.
Evercore ISI also notes the progress of Broadcom's integration with VMWare, which is reportedly proceeding more smoothly than anticipated. This positive integration is seen as a contributing factor to the company's overall performance.
Additionally, semiconductor revenues excluding AI are believed to be below the trendline, suggesting potential for a restocking cycle that could extend through the calendar year 2024 and into 2025.
Broadcom's financial performance and strategic moves in the AI sector indicate a promising outlook, as reflected in the revised price target. The increase in the target price follows the company's report on April 24, which revealed a stronger-than-expected financial picture and set a conservative revenue outlook that Evercore ISI believes has room for additional growth.
In other recent news, Broadcom Inc. has revised its annual revenue projection upward to approximately $51 billion, surpassing the average analyst expectation of $50.42 billion for fiscal 2024.
This adjustment reflects robust demand for Broadcom's networking gear and custom chips, which are increasingly supporting businesses as they expand their artificial intelligence (AI) capabilities. The revised forecast also includes contributions from VMware (NYSE:VMW) Inc., highlighting the strategic importance of this partnership.
In addition to this, Citi has reiterated its Buy rating on Broadcom, with expectations of the company outperforming market expectations in its upcoming third-quarter fiscal year 2024 earnings. This optimism is attributed to an increase in AI sales, which account for 22% of the company's fiscal year 2024 sales, and benefits from the recent acquisition of VMWare.
BofA Securities also maintains a Buy rating on Broadcom, with a price target of $1,680.00, in line with a full-year sales outlook of approximately $50 billion. Morgan Stanley has resumed coverage on Broadcom, assigning an Overweight rating, influenced by the company's potential in the AI sector following its acquisition of VMWare. Melius Research has initiated coverage on Broadcom with a Buy rating, highlighting growth potential from its Networking division and stability from its software business.
Broadcom recently introduced a new line of 400G PCIe Gen 5.0 Ethernet adapters, aimed at enhancing data center efficiency and supporting the growing bandwidth demands of AI-driven data centers.
Furthermore, the company announced the expansion of its global software distribution efforts through the Accelerate Program, aiming to enhance service levels for a broader range of Broadcom software products across various regions. These developments are part of Broadcom's ongoing efforts to meet the evolving needs of data center infrastructure and AI.
InvestingPro Insights
Broadcom's financial trajectory and strategic positioning in the high-growth AI sector are underscored by recent data from InvestingPro. With a robust market capitalization of $693.05 billion, Broadcom's significant presence is marked by a noteworthy 12.94% revenue growth over the last twelve months as of Q1 2024. The company's dedication to shareholder returns is evident through its dividend, which has been raised for 14 consecutive years, showcasing a commitment to consistent financial returns. Additionally, analysts are not only predicting sales growth in the current year but also a strong profitability outlook. These factors, combined with a high gross profit margin of 74.24%, paint a picture of a company with solid fundamentals and a strong competitive edge in its industry.
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