On Thursday, Broadcom Limited (NASDAQ:AVGO) shares witnessed its price target being raised to $2,000 from the previous $1,650, while retaining an Overweight rating. The company's shares experienced an approximate 15% increase after hours, buoyed by strong April quarter results that surpassed expectations.
The positive market reaction followed announcements regarding consistent revenue streams from AI initiatives, progress on the VMware (NYSE:VMW) integration, and news of a 10-for-1 stock split.
Broadcom's management shed light on the company's custom accelerator business during the earnings call, highlighting wins in the next generation of chips across all customer engagements.
The firm's integration of VMware into its software portfolio was also a focal point, with expectations for the business to reach $4 billion in quarterly revenues by FY25, a significant increase from the current $2.1 billion.
The company's strategic approach to business rationalization was underscored as a critical factor in successfully transitioning VMware's business model to better suit Broadcom's existing software portfolio. Furthermore, the CEO mentioned a notable year-over-year doubling in switch shipments, driven by demand from AI data center clusters.
Broadcom's overall performance and strategic initiatives have led to a reiteration of the Overweight rating and a new price target set at $2,000. The company's forward-looking statements and management's commentary have contributed to the stock's positive movement in the after-hours trading session.
In other recent news, Broadcom has seen a series of price target increases following strong earnings and revenue results. Oppenheimer raised its target to $2,000, citing exceptional second-quarter earnings of $12.49 billion and EPS of $10.96, which outperformed expectations. The firm also highlighted Broadcom's AI-related revenue forecast, which was increased to over $11 billion for the current year.
Wells Fargo (NYSE:WFC), Melius, Truist Securities, Cantor Fitzgerald, and Citi also increased their price targets for Broadcom, reflecting confidence in the company's financial performance and future prospects. This was driven by the strong growth in Broadcom's AI-related semiconductor revenue, which is predicted to exceed $11 billion in fiscal year 2024.
Broadcom's non-AI segments like broadband, storage, and industrial are reportedly near or at their troughs, suggesting potential for an incremental upside in the second half of the year. Additionally, an expected iPhone refresh is predicted to contribute to a seasonal rise in wireless revenue in the latter half of the year.
Broadcom also announced a 10:1 stock split set to take effect later this year, a move expected to increase stock liquidity and accessibility to a wider range of investors. Despite a forecasted decline in its storage business, Broadcom anticipates a recovery in server storage connectivity in the second half of the year. These are some of the recent developments that highlight Broadcom's robust growth in key areas, particularly in AI.
InvestingPro Insights
In light of Broadcom's recent achievements and the updated price target, real-time data from InvestingPro offers additional insights. With a robust market capitalization of $693.05 billion and a price-to-earnings (P/E) ratio of 54.42, Broadcom's financial health remains strong. The company's revenue growth is also noteworthy, with a 12.94% increase over the last twelve months as of Q1 2024, and an impressive quarterly growth of 34.17% in Q1 2024. Furthermore, Broadcom's commitment to shareholder returns is evident, having raised its dividend for 14 consecutive years, which is a testament to its financial stability and a factor that may contribute to investor confidence.
InvestingPro Tips suggest that analysts are optimistic about Broadcom's sales growth in the current year, which aligning with the company's reported progress in AI initiatives and VMware integration. Additionally, with the company trading near its 52-week high, investors may want to consider the momentum and its implications for future performance. For those looking to delve deeper into Broadcom's potential and explore further InvestingPro Tips, there are 16 additional tips available at: https://www.investing.com/pro/AVGO. Remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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