On Friday, UBS maintained a positive outlook on Broadcom Limited (NASDAQ:AVGO), raising its price target from $200.00 to $220.00 while keeping a Buy rating on the stock. With a market capitalization of $843.79 billion and trading near its 52-week high, Broadcom has demonstrated strong momentum.
According to InvestingPro data, the company's robust performance has led to it currently trading at premium valuations. The move comes following the company's latest financial results and guidance, which were received well by the market.
Broadcom's recent performance and forward-looking statements have assuaged concerns among investors, according to UBS. The company's emphasis on growing its artificial intelligence (AI) capabilities was particularly noted as a key driver for future growth, supported by impressive revenue growth of 32% in the last twelve months and an outstanding gross profit margin of 74.7%.
InvestingPro analysis indicates the company maintains GREAT financial health, positioning it well for future expansion. Broadcom's engagement with hyperscale customers on custom ASIC programs is expected to significantly increase the AI serviceable available market (SAM) for the company by four to five times within the next three years.
The expansion into AI is further bolstered by Broadcom's pursuit of new hyperscale customers, with potential revenue opportunities comparable to those of its existing three major clients. These additional customers could provide substantial increases to Broadcom's revenue streams in the upcoming years.
UBS also highlighted the recovery of Broadcom's legacy semiconductor business, which, while still approximately 35% below peak levels, is poised to contribute to the company's revenue growth. Additionally, the acquisition of VMware (NYSE:VMW) is projected to potentially add up to $1 billion per quarter to Broadcom's revenue over the next year.
Overall, UBS's revised price target reflects confidence in Broadcom's strategic direction, particularly in the AI sector, and anticipates the company's continued revenue growth through both its expanding AI initiatives and its legacy semiconductor operations. With analyst targets ranging from $155 to $250 and a strong Buy consensus, the market remains optimistic about Broadcom's prospects.
For deeper insights into Broadcom's valuation and growth metrics, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks with detailed analysis and actionable intelligence.
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