Broadcom: 3 Reasons To Stay Bullish

Summary:

• Broadcom’s strong financials, AI prospects, and sales structure updates support continued growth, justifying a “Buy” rating despite market fears of overvaluation.
• The ambitious AI market projections for 2027 have driven short-term growth, with expectations of $45 billion in AI revenue by FY 2027.
• I expect VMware’s high-margin software business to underpin AVGO’s AI semiconductors’ growth and bring robust cash flow and margin stability on a consolidated basis.
• I think Broadcom’s valuation is reasonable given current market conditions, with potential for further upside through continued EPS outperformance and share buybacks, targeting $250-255 per share by 2025.
• I decided to keep my “Buy” rating unchanged today.

My Thesis Update

I first initiated coverage of Broadcom Inc. (NASDAQ:AVGO) on March 22, 2024, stating that “the company’s strong financials, sales structure updates, and AI prospects pointed to further outperformance in the future.”

Analyst’s Disclosure: I/we have a beneficial long position in the shares of AVGO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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