On Thursday, Goldman Sachs (NYSE:GS) showed confidence in Broadcom Limited (NASDAQ:AVGO) shares by raising its price target to $1,850 from the previous $1,550, while keeping a Buy rating on the stock. The firm's optimism is based on Broadcom's strong performance, particularly in the AI semiconductor sector and its recent acquisition of VMware (NYSE:VMW).
Broadcom's recent fiscal quarter results surpassed cautious investor expectations, with notable revenue increases in its AI semiconductor business, which grew by 35% quarter-over-quarter and an impressive 280% year-over-year.
Additionally, the company's VMware segment reported a 28% sequential revenue rise. These robust performances have led to positive revisions in consensus earnings per share (EPS) and free cash flow (FCF) forecasts.
Goldman Sachs has updated its revenue and non-GAAP EPS estimates for Broadcom for fiscal years 2024-2026, increasing them by an average of 7% and 6%, respectively, excluding stock-based compensation (SBC).
The firm's analysis suggests that Broadcom, alongside Nvidia (NASDAQ:NVDA), is integral to the development of AI infrastructure. The analyst expects the stock to outperform, with an 8% potential upside from Broadcom's after-hour price of $1,713 to the new 12-month price target.
In conjunction with its earnings announcement today, Broadcom also declared a 10-for-1 stock split, which is expected to take effect on July 15. This move could make the company's shares more accessible to a broader range of investors and potentially increase stock liquidity.
In other recent news, Broadcom has been a focal point of several financial and strategic developments. The company has exceeded revenue expectations by 4% and earnings per share (EPS) by 1% in its recent quarterly report, leading to an updated annual revenue forecast of $51 billion, a 2% increase from previous projections. This adjustment reflects strong demand for Broadcom's networking gear and custom chips, including contributions from its partnership with VMware Inc.
Analysts from Morgan Stanley (NYSE:MS), Evercore ISI, and Citi have maintained positive outlooks on Broadcom, citing factors such as the company's potential in the AI sector, benefits from the recent acquisition of VMware, and the addition of two new custom AI silicon customers.
These firms have also raised their stock price targets for Broadcom, reflecting their confidence in the company's strategic direction and ability to navigate the current market environment effectively.
Broadcom has also introduced a new line of 400G PCIe Gen 5.0 Ethernet adapters to enhance data center efficiency and meet the growing bandwidth demands of AI-driven data centers.
Additionally, the company has 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 are the latest developments in Broadcom's ongoing efforts to meet the evolving needs of data center infrastructure and AI.
InvestingPro Insights
Broadcom Limited (NASDAQ:AVGO) has demonstrated a strong financial performance, reflected in the latest data from InvestingPro. With a robust market capitalization of $693.05 billion and a significant revenue growth of 12.94% over the last twelve months as of Q1 2024, Broadcom stands out as a prominent player in the semiconductor industry. The company's dedication to shareholder returns is evident through its consistent dividend payouts, which have increased for 15 consecutive years, an InvestingPro Tip that aligns with the company's recent performance. Additionally, the impressive gross profit margin of 74.24% underscores Broadcom's ability to maintain profitability and efficiency.
Investors looking to delve deeper into Broadcom's financial health can explore more InvestingPro Tips, such as the company's anticipated sales growth in the current year and its position as a significant contributor to AI infrastructure development. With 16 additional tips available on InvestingPro, subscribers can gain a comprehensive understanding of Broadcom's investment potential. Don't forget to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of insights to inform investment decisions.
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