On Tuesday, Wells Fargo reaffirmed its Equal Weight rating on shares Broadcom Limited (NASDAQ:AVGO) with a consistent price target of $170.00. The firm focused on the company's momentum in custom AI, noting the market's anticipation that Broadcom might increase its fiscal year 2024 AI semiconductor revenue target from over $11 billion to potentially more than $12 billion. Wells Fargo's own projections are slightly above this, at $12.2 billion.
Broadcom's custom AI ASICs, which are estimated to account for approximately 70% of the previously guided $11 billion, are significant contributors to this expected revenue, with projections set at $8.2 billion. The remainder of the revenue is expected to come from networking and other sources, estimated at $4.1 billion.
The company's reliance on key clients like Google (NASDAQ:GOOGL) TPU and Meta (NASDAQ:META) for custom AI products is noted, with efforts to diversify and add a third major customer in 2024, as well as other long-term opportunities in the hyperscale sector.
The firm also mentioned past reports from mid-July indicating that OpenAI was collaborating with Broadcom on AI-optimized silicon, with potential initial production slated for no earlier than calendar year 2026. Other significant potential clients for Broadcom's custom AI solutions include Microsoft (NASDAQ:MSFT), ByteDance, and Apple (NASDAQ:AAPL) Intelligence. Broadcom's main competitor in this space is identified as Marvell (NASDAQ:MRVL), which has notable clients such as AWS and Google, and is expected to add a third major customer, Microsoft, in 2026.
Looking ahead to fiscal year 2025, Wells Fargo anticipates Broadcom's AI semiconductor revenues to surge by 40% year-over-year, reaching an estimated $17.1 billion. This projection underscores the growth trajectory that the firm expects for Broadcom in the AI semiconductor market over the coming years.
In other recent news, Broadcom has launched a new initiative named Catalyst, aimed at enhancing its Accelerate Program by engaging elite Enterprise Security Group partners. The company's second-quarter earnings outperformed expectations, reporting sales of $12.49 billion and earnings per share of $10.96.
In addition, Broadcom's AI-related revenue forecast has been raised to over $11 billion for the current year. Following a recent 10-for-1 stock split, several analyst firms have adjusted their price targets. Cantor Fitzgerald maintained an Overweight rating, adjusting its price target to $200, while Oppenheimer kept an Outperform rating, reducing its price target to $200.
TD Cowen maintained a Buy rating and raised the price target to $210. Evercore ISI also set a new target at $201 post-split, maintaining an Outperform rating. These recent developments indicate a positive trajectory for Broadcom's performance in the market.
InvestingPro Insights
As Broadcom Limited (NASDAQ:AVGO) continues to focus on growth in the AI semiconductor space, recent data from InvestingPro provides a broader financial perspective on the company's performance and market valuation.
With a substantial market capitalization of $743.01 billion and a high Price/Earnings (P/E) ratio of 67.79, Broadcom is trading at a premium, reflecting its position as a prominent player in the Semiconductors & Semiconductor Equipment industry. This is supported by a strong revenue growth of 21.62% in the last twelve months as of Q2 2024, which aligns with analysts' anticipation of sales growth in the current year.
InvestingPro Tips highlight that Broadcom has not only raised its dividend for 14 consecutive years but has also maintained these payments for 15 consecutive years, indicating a commitment to returning value to shareholders.
Moreover, the company's stock has shown a high return over the last year, with a price total return of 90.68%. For investors considering the long-term potential, Broadcom has also demonstrated a strong return over the last five years. For more detailed analysis and additional InvestingPro Tips, investors can refer to the InvestingPro platform, which lists 14 tips in total for Broadcom Limited.
These financial metrics and InvestingPro Tips provide a comprehensive view of Broadcom's financial health and market position, offering valuable insights for investors looking at the company's stock in relation to its AI semiconductor initiatives and future revenue projections.
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