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Broadcom Inc AVGO

Morningstar Rating
$1,745.86 +42.55 (2.50%)
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Company Report

Broadcom Earnings: Another Excellent Period for AI Brings Our Forecast and Valuation Up

We raise our fair value estimate for wide-moat Broadcom to $1,550 per share from $1,350 as we raise our medium-term growth forecast for artificial intelligence revenue. AI chip sales exceeded our expectations, and management raised its full-year guide for AI and total firm revenue. Even so, we see the new fiscal 2024 AI guidance as conservative and model further upside. Broadcom’s impressive AI results lend credence to our long-term thesis for networking to benefit from robust generative AI investment and for Ethernet to take share within generative AI networks. Positively, Broadcom also raised its guidance for VMware cost-cutting in fiscal 2024, which we believe will help short-term margins. Shares rose more than 10% after-hours, aligning with our valuation raise. We continue to see Broadcom’s valuation as challenging, reflecting even more robust AI sales growth than our bullish expectations.

Price vs Fair Value

AVGO is trading at a 229% premium.
Price
$1,745.86
Fair Value
$1,291.00
Uncertainty
Medium
1-Star Price
$1,247.80
5-Star Price
$4,214.00
Economic Moat
Ccw
Capital Allocation
Jfxmhhgy

Bulls Say, Bears Say

Bulls

Broadcom is a poster child for operating efficiency. It earns excellent operating margins and generates enormous cash flow. It is particularly strong at acquiring companies and trimming excess expenses.

Bears

Broadcom has sizable exposure to nonmoaty businesses, in our view, like its broadband and storage chips.

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News

Trading Information

Previous Close Price
$1,703.31
Day Range
$1,705.001,756.90
52-Week Range
$795.091,851.62
Bid/Ask
$1,758.00 / $1,760.00
Market Cap
$812.68 Bil
Volume/Avg
16,691 / 3.4 Mil

Key Statistics

Price/Earnings (Normalized)
40.09
Price/Sales
18.41
Dividend Yield (Trailing)
1.17%
Dividend Yield (Forward)
1.20%
Total Yield
2.70%

Company Profile

Broadcom is the sixth-largest semiconductor company globally and has expanded into various software businesses, with over $30 billion in annual revenue. It sells 17 core semiconductor product lines across wireless, networking, broadband, storage, and industrial markets. It is primarily a fabless designer but holds some manufacturing in-house, like for its best-of-breed FBAR filters that sell into the Apple iPhone. In software, it sells virtualization, infrastructure, and security software to large enterprises, financial institutions, and governments.Broadcom is the product of consolidation. Its businesses are an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as Brocade, CA Technologies, and Symantec in software.
Sector
Technology
Industry
Semiconductors
Stock Style Box
Large Growth
Total Number of Employees
20,000

Competitors

Valuation

Metric
AVGO
MRVL
QCOM
Price/Earnings (Normalized)
40.0952.0322.72
Price/Book Value
11.564.489.50
Price/Sales
18.4112.106.44
Price/Cash Flow
36.7647.3822.88
Price/Earnings
No chart available

Financial Strength

Metric
AVGO
MRVL
QCOM
Quick Ratio
0.761.181.85
Current Ratio
1.251.802.65
Interest Coverage
4.72−2.5312.69
Quick Ratio
No chart available

Profitability

Metric
AVGO
MRVL
QCOM
Return on Assets (Normalized)
17.62%5.83%14.08%
Return on Equity (Normalized)
48.13%8.30%32.62%
Return on Invested Capital (Normalized)
23.28%7.20%19.56%
Return on Assets
No chart available
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