On Thursday, Bernstein, a well-known financial firm, increased the price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) shares to $1,950.00, up from the previous $1,600.00. The firm has also reaffirmed its Outperform rating on the company's stock. The revision reflects an optimistic outlook for the latter half of the year and beyond, particularly in the areas of storage, core networking, and broadband.
Broadcom's core semiconductor business has shown signs of reaching a low point in the second quarter, with expectations of a rebound in the second half of the year. This anticipation is set to lay a foundation for a stronger performance in 2025.
Additionally, the company's conservative forecast for its artificial intelligence (AI) revenue, estimated at $11 billion for the year, suggests modest revenue growth of about 4% in the second half over the first half, despite a lower run rate from the second fiscal quarter.
The company's acquisition of VMware (NYSE:VMW) is projected to be a significant growth driver in the next year, with a $4 billion revenue run rate expected in the coming quarters, either by the fourth quarter or the first quarter of the next fiscal year.
This implies that revenues could surpass $16 billion next year. Gross margins have remained stable, buoyed by the growth of software sales, which have compensated for increased ASIC sales.
In addition to the financial outlook, Broadcom announced a 10:1 stock split. The move is part of the company's strategy to make its shares more accessible to a broader range of investors.
In light of these developments, Bernstein has updated its model and raised its estimates for Broadcom. The valuation horizon has been extended to the average of fiscal years 2025 and 2026, and the price-to-earnings multiple has been increased from 27x to 30x, acknowledging the company's growing AI exposure. The revised price target of $1,950 underscores Bernstein's continued confidence in Broadcom's performance.
In other recent news, Broadcom has reported notable financial and strategic advancements. Analysts from Barclays (LON:BARC), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) have raised their price targets for the company, reflecting confidence in Broadcom's strong position in the AI sector and benefits from the recent acquisition of VMware.
The company's recent quarterly report surpassed revenue expectations by 4%, and earnings per share (EPS) by 1%, leading to an updated annual revenue forecast of $51 billion, a 2% increase from previous projections.
Evercore ISI also increased its price target for Broadcom, citing the company's addition of two new custom AI silicon customers and the successful integration with VMware. The firm's confidence in Broadcom is further bolstered by the company's recent strategic moves in the AI sector and promising financial performance.
Broadcom's ongoing efforts to meet the evolving needs of data center infrastructure and AI have been highlighted with the introduction of a new line of 400G PCIe Gen 5.0 Ethernet adapters.
Additionally, the company has expanded its global software distribution efforts through the Accelerate Program. These are among the latest developments in Broadcom's strategy to navigate the current market environment effectively.
InvestingPro Insights
Broadcom Limited's (NASDAQ: AVGO) recent achievements and strategic moves have not gone unnoticed in the investor community, as reflected by the increased price target from Bernstein. In line with this positive sentiment, InvestingPro data shows a robust market capitalization of $693.05 billion, indicating strong investor confidence in the company's market presence. Furthermore, the company's impressive gross profit margin of 74.24% over the last twelve months as of Q1 2024, coupled with a revenue growth of 12.94% in the same period, underscores its operational efficiency and ability to scale effectively.
InvestingPro Tips highlight Broadcom's consistent dividend growth, with the company raising its dividend for 15 consecutive years, a testament to its financial stability and commitment to shareholder returns. Additionally, analysts are anticipating sales growth in the current year, which aligns with Bernstein's optimistic outlook for the company's future performance, particularly in its core semiconductor business and the integration of VMware.
Investors seeking to delve deeper into Broadcom's financial health and future prospects can find additional insights and tips on InvestingPro. With 16 more tips available, including detailed analyses of valuation multiples and profitability forecasts, InvestingPro offers a comprehensive look at the factors driving Broadcom's success. For those interested, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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