On Thursday, CFRA maintained a Buy rating on Broadcom Limited (NASDAQ:AVGO) and raised its stock price target from $1,600 to $1,850. The increase reflects a positive outlook based on the company's expanding artificial intelligence (AI) and software exposure.
Broadcom's recent earnings report for the April quarter revealed earnings per share (EPS) of $10.96, surpassing the consensus estimate of $10.84. This beat was driven by a 43% increase in sales, with notable growth in Infrastructure Software and Semiconductor Solutions segments.
The firm's Infrastructure Software sales soared by 175%, while Semiconductor Solutions saw a 6% rise. AI sales were particularly robust, experiencing a 280% surge to $3.1 billion in the April quarter. The company's full-year forecast for AI sales now stands at over $11 billion. Broadcom's networking segment also showed impressive growth of 44%, representing 53% of semiconductor sales, propelled by strong demand for its Ethernet switches and higher customer silicon revenue.
The analyst has kept the fiscal year 2024 (ending in October) EPS estimate at $49.16 and increased the fiscal year 2025 projection to $60.00 from the previous $56.90. The upward revision is attributed to the company's performance and the expectation of continued growth in AI-related sales. Broadcom's non-AI semiconductor sales, which appeared to have reached a low point, are also contributing to the company's positive trajectory.
Broadcom's integration of VMware (NYSE:VMW) is reportedly ahead of schedule, as evidenced by a significant reduction in spending, which is projected to drop to $1.3 billion by the end of the fourth quarter from $1.6 billion in the April quarter and $2.3 billion in late 2023. The company has streamlined its product offerings from over 8,000 to four core offerings and is successfully transitioning customers to subscription plans.
In a move mirroring NVIDIA (NASDAQ:NVDA), Broadcom announced a 10-for-1 stock split, signaling confidence in its financial stability and future growth prospects. This strategic decision is expected to make the company's shares more accessible to a broader range of investors.
In other recent news, Broadcom Inc. has seen a surge in investor interest following robust earnings and revenue results, driven largely by AI-related chip sales. The company has raised its annual revenue forecast for these chips to $11 billion, up from a previous estimate of $10 billion. This positive adjustment has been echoed by several analyst firms, including Piper Sandler, Oppenheimer, and Wells Fargo (NYSE:WFC), each of which has raised its price target for Broadcom.
Broadcom's acquisition of VMware Inc. has also contributed significantly to its financial performance, adding $2.7 billion to its second-quarter revenue. The integration of this acquisition into Broadcom's software portfolio is expected to result in quarterly revenues reaching $4 billion by FY25.
In addition to these developments, the company has announced a 10-for-1 stock split, a move that analysts from Triple D Trading and GraniteShares have applauded for its potential to increase stock liquidity and accessibility. Morningstar analysts have also expressed a positive outlook on Broadcom's positioning in the AI investment landscape.
Still, it is important to note that while Broadcom's AI-related revenue is growing, its 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.
Despite a forecasted decline in its storage business, Broadcom anticipates a recovery in server storage connectivity in the latter part of the year. These recent developments underscore Broadcom's robust growth in key areas, particularly in AI.
InvestingPro Insights
In light of CFRA's positive stance on Broadcom Limited (NASDAQ:AVGO), the latest data from InvestingPro further supports the optimistic outlook. With a robust market capitalization of $780.41 billion, Broadcom stands as a heavyweight in the tech industry.
The company's price-to-earnings (P/E) ratio, while high at 71.12, reflects investor confidence in its future earnings potential, especially given the strong revenue growth of 12.94% over the last twelve months as of Q1 2024. Moreover, the gross profit margin of 74.24% underscores Broadcom's ability to maintain profitability in its operations.
InvestingPro Tips highlight that Broadcom has not only raised its dividend for 14 consecutive years but also maintained dividend payments for 15 consecutive years, showcasing a commitment to shareholder returns. Moreover, the company enjoys a high return over the last year, further cementing its status as a prominent player in the Semiconductors & Semiconductor Equipment industry.
For investors looking for more in-depth analysis and additional tips, there are 17 more InvestingPro Tips available for Broadcom, which can be accessed with a subscription. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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