On Friday, Broadcom Limited (NASDAQ:AVGO), currently trading near its 52-week high of $186.42, saw its price target increased by Evercore ISI from $201.00 to $250.00, while the firm maintained an Outperform rating on the stock. The revision follows Broadcom's earnings report, which showed a modest beat on the October quarter earnings per share (EPS) and provided an upbeat January quarter implied EPS outlook. The company's strong performance is reflected in its impressive 63.59% year-to-date return, according to InvestingPro data.
The analyst at Evercore ISI highlighted Broadcom's position as a prime beneficiary in the custom AI chip market, a perspective detailed in their recent industry note. With a robust gross profit margin of 74.71% and revenue growth of 32.04%, Broadcom has demonstrated strong operational efficiency.
The company's recent earnings call revealed that its serviceable addressable market (SAM) for three hyperscaler customers is estimated to be between $60 billion and $90 billion. The company anticipates that these customers will be building out 1 million XPU clusters by fiscal year 2027, a substantial increase from the current SAM of $15 billion to $20 billion.
Broadcom's management did not set specific market share goals but noted that its products are not in direct competition with merchant GPUs from companies like Nvidia (NASDAQ:NVDA) or AMD (NASDAQ:AMD). Instead, Broadcom provides the hardware foundation for hyperscalers to develop AI software stacks. The company also sees itself as an intellectual property leader in the XPU market, comparing its technology portfolio to that of Nvidia.
Furthermore, the CEO of Broadcom expressed confidence in the industry's growth potential, suggesting that the use of AI-generated synthetic data could greatly expand the current scaling limits of large language models (LLMs).
Evercore ISI shares this optimistic view and has adjusted their price target based on a projected $9.5 EPS in calendar year 2027, applying a 29x next twelve months (NTM) price-to-earnings (PE) ratio, discounted back one year at 10%.
According to InvestingPro's comprehensive analysis, Broadcom maintains a "GREAT" financial health score, though current valuations suggest the stock is trading above its Fair Value. Investors seeking deeper insights can access the full Pro Research Report, which provides detailed analysis of Broadcom's financials, valuation metrics, and growth prospects, along with 15 additional ProTips available exclusively to subscribers.
In other recent news, Broadcom Limited has been the focus of several financial analysts, with Deutsche Bank (ETR:DBKGn), UBS, Piper Sandler, Truist Securities, and KeyBanc all increasing their price targets for the company. This comes on the heels of impressive revenue growth and positive future projections, particularly in Broadcom's artificial intelligence (AI) sector.
Broadcom's AI business has seen substantial revenue growth, with the company estimating a future serviceable available market (SAM) of approximately $60-90 billion by fiscal year 2027 for its AI products. This projection encompasses networking and various AI chips, catering to three current hyperscale customers and two additional customers in the pipeline.
The company's overall revenue growth remains impressive at 32% over the last twelve months, with an excellent gross profit margin of around 75%. Broadcom's management also announced the acquisition of two additional hyperscale customers for its XPU business, signifying growth opportunities and validation of the increasing demand for custom processing solutions among hyperscalers.
Broadcom's financial health score is rated as "GREAT" by InvestingPro, supported by strong profitability and momentum scores. This robust performance, combined with the company's strategic expansion in the AI market, has led to increased confidence among analysts.
Deutsche Bank, UBS, and Piper Sandler's price target increases reflect this optimism, with Deutsche Bank applying a price-to-earnings (P/E) ratio of around 30 times the calendar year 2026 earnings, which is consistent with the multiples for other leading AI industry peers. Truist Securities and KeyBanc also raised their price targets, citing AI-driven growth and the potential for increased dividends as key factors.
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