On Monday, an analyst at Rosenblatt raised the price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) to $1,500, up from the previous $1,160, while maintaining a Buy rating on the stock. The adjustment comes amid expectations for Broadcom to surpass January quarter expectations due to ongoing trends in AI semiconductors, which account for a mid-teens percentage of sales. This performance is anticipated to lead to an improved outlook for fiscal year 2024.
The analyst noted that sectors like non-AI enterprise, wireless, telecommunications, and broadband are either bottoming out or stabilizing. Moreover, infrastructure software is expected to continue on a consistent and stable growth trajectory. Broadcom shares have experienced a significant increase, rising approximately 50% over the last three months, outpacing the SOX index's 33% gain. This surge is attributed to excitement over AI and a projected cyclical recovery in the industry during the second half of 2024.
An upcoming AI merchant silicon investor day, scheduled to coincide with the Nvidia (NASDAQ:NVDA) GTC mega event in Silicon Valley, is likely to sustain investor enthusiasm, albeit at a more modest rate. The analyst suggests that as the market adjusts to the impact of AI on Broadcom's predominantly non-AI driven business model, the continued interest will be more measured.
The new price target of $1,500 is based on a mid-20s price-to-earnings (P/E) ratio, an increase from the previous P/E ratio of around 20. This revised target is deemed justified and reasonable, given the cyclical semiconductor dynamics and Broadcom's strong cash generation and dividend profile. Despite the recent run-up in share price, the analyst advises that any near-term pullbacks could present accumulation opportunities for long-term investors.
InvestingPro Insights
As Broadcom Limited (NASDAQ: AVGO) garners positive analyst attention with a raised price target and anticipation of strong quarterly performance, InvestingPro data provides a deeper dive into the company's financial metrics. Broadcom's market capitalization stands at a robust $648.4 billion, reflecting its significant presence in the market. The company's P/E ratio, as of the last twelve months ending Q4 2023, is recorded at 45.39, which is above the industry average, indicating investor confidence in Broadcom's earnings potential.
InvestingPro Tips highlight that Broadcom has not only raised its dividend for 14 consecutive years but also maintains a dividend yield of 1.5%, showcasing its commitment to returning value to shareholders. Additionally, analysts anticipate sales growth in the current year, signaling confidence in Broadcom's revenue trajectory. This aligns with the 7.88% revenue growth Broadcom achieved over the last twelve months as of Q4 2023. Broadcom's solid financials, paired with a strong dividend profile, support the raised price target and the bullish outlook shared by analysts.
For investors seeking to explore further insights and tips on Broadcom, InvestingPro offers additional information that could inform investment decisions. With a total of 22 additional InvestingPro Tips available, users can gain a comprehensive understanding of Broadcom's financial health and market position. Interested readers can access these valuable tips and make more informed investment choices by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.