On Thursday, Citi maintained a Buy rating on Broadcom Limited (NASDAQ:AVGO) shares and raised its price target to $1,750 from $1,560. This adjustment follows Broadcom's recent report of financial results that surpassed market expectations, largely attributed to robust performance in its artificial intelligence (AI) segment and the integration of VMware (NYSE:VMW), which together accounted for 46% of the company's sales in the second fiscal quarter of 2024.
Broadcom's fiscal year 2024 AI revenue forecast has been increased from $10+ billion to $11+ billion, aligning with Citi's projections. The firm has reiterated its confidence in Broadcom, citing the potential for continued outperformance relative to consensus estimates. This optimism is grounded in the anticipated benefits stemming from the company's AI initiatives and synergies realized through the VMware acquisition.
In a significant corporate development, Broadcom announced a 10-for-1 stock split scheduled to take effect on July 15. The split is expected to increase the stock's liquidity and make it more accessible to a broader range of investors.
Citi's new price target of $1,750 reflects a multiple of 33 times the estimated earnings per share for calendar year 2025. This valuation represents a 10% discount compared to Broadcom's AI industry peers, suggesting a conservative approach to the company's growth prospects in the competitive AI market.
The upward revision in Broadcom's price target and the reaffirmation of the Buy rating reflect a positive outlook on the company's financial performance, underpinned by strategic acquisitions and a growing presence in the AI sector.
In other recent news, Broadcom Limited has seen a series of positive adjustments from analysts following its robust Q2 performance and strong AI revenue growth. Mizuho, Baird, Rosenblatt Securities, Jefferies, and UBS have all raised their price targets for the company, reflecting a vote of confidence in Broadcom's market position and future prospects.
The company's second-quarter consolidated net revenue reached $12.5 billion, marking a 43% increase year-over-year, primarily driven by a 280% surge in AI revenue to $3.1 billion.
Broadcom's fiscal year 2024 revenue guidance has been revised upwards to $51 billion, anticipating a significant contribution from its AI segment, which is expected to exceed $11 billion.
Despite a forecasted decline in its storage business, the company anticipates a recovery in server storage connectivity in the latter half of the year. Broadcom's strong financial outlook is further underpinned by its gross margin and operating margin forecasts for fiscal year 2024, standing at 77% and 59% respectively.
These recent developments highlight Broadcom's robust growth in key areas, particularly in AI, and suggest a positive trajectory for the company moving forward. However, it's important to note that these are projections and actual results may vary.
InvestingPro Insights
Broadcom Limited's (NASDAQ:AVGO) recent accomplishments and strategic moves, including the successful integration of VMware and the impressive AI segment performance, have not only caught the eye of Citi analysts but are also reflected in key metrics. With a robust market capitalization of $693.05 billion and a forward-looking P/E ratio of 55.12, the company's financial health appears strong. The revenue growth stands out at 12.94% for the last twelve months as of Q1 2024, signaling a positive trajectory. Furthermore, Broadcom has consistently rewarded shareholders, as evidenced by a dividend yield of 1.4% and a notable dividend growth rate of 14.13% in the same period.
InvestingPro Tips highlight Broadcom's sustained commitment to shareholder returns, with the company raising its dividend for 14 consecutive years. Additionally, analysts anticipate sales growth in the current year, which aligns with Citi's outlook and may contribute to the company's potential for continued outperformance. For those looking to delve deeper into Broadcom's investment profile, there are 17 additional InvestingPro Tips available, offering a comprehensive analysis of the company's market position and financial health. Investors interested in these insights can explore them further on InvestingPro's dedicated page for Broadcom at https://www.investing.com/pro/AVGO. To enhance your research with these detailed tips, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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