Goldman Sachs analysts reinstated a Buy rating on Broadcom (NASDAQ:AVGO) with a 12-month price target of $1325, indicating a 16% potential upside.
The bullish outlook is underpinned by expectations of “strong double-digit revenue growth” in AVGO's AI-related businesses, particularly high-speed networking and custom compute segments.
“We expect the proliferation of Gen AI across a broad set of data center workloads to drive strength in Broadcom’s custom compute offload and next-generation Networking businesses both in the near- and medium-term,” analysts said.
Moreover, a cyclical recovery in Broadcom's classic Semiconductor business, closely tied to Enterprise spending, is anticipated. The synergy capture following the acquisition of VMware is expected to contribute to operating margin expansion and earnings growth surpassing industry averages.
“We expect constructive data points related to Gen AI spending and quarterly earnings to serve as positive catalysts for the stock over the near- and medium-term.”
Finally, Goldman Sachs sees AVGO's attractive capital return profile as a further catalyst for the stock's relative outperformance.
“Supported by many of its strong, differentiated business franchises, Broadcom has generated, on a consistent basis, industry-leading margins and FCF,” analysts concluded.
Broadcom stock is up 1.5% in pre-open Friday.