On Friday, Rosenblatt maintained a Buy rating on Broadcom Limited (NASDAQ:AVGO) with a consistent price target of $240.00. The firm's stance comes after Broadcom reported modest results for the July quarter, citing gains from VMWare enterprise software, semi AI compute and networking momentum, along with a recovery in non-AI semiconductor units. Broadcom's October quarter outlook is mixed, projecting revenues of $14.0 billion, which is above Rosenblatt's $13.6 billion estimate but falls short of the $14.1 billion market consensus.
The analyst noted that market expectations might have been slightly overestimated regarding the trajectory of AI custom ASICs, acknowledging that while the performance is strong, it does not quite match Nvidia (NASDAQ:NVDA)'s. Additionally, there's an anticipation of a modest decline in the non-VMWare business segment. Despite these challenges, Rosenblatt's commentary reflects confidence in Broadcom's management and the company's ability to navigate through recent down-cycles.
Rosenblatt's analysis suggests that the industry's interest is piqued by the competition between Broadcom's custom ASICs and Nvidia's GPUs. The firm believes that comparing the two is not straightforward, as both products can coexist successfully in the market. This perspective is based on the notion that AI compute open to industry connectivity standards will continue to grow, especially in acceleration, general AI, and networking across Cloud and Edge segments.
The firm has slightly increased its estimates for Broadcom and expresses optimism about the company's prospects, especially in the AI compute space. The $240 price target for the next 12 months is grounded on a low-30s P/E ratio applied to Rosenblatt's forecast of $7.60 Non-GAAP EPS for FY26. This outlook underscores a belief in Broadcom's ongoing potential and the evolution of AI compute technology.
In other recent news, Broadcom Limited continues to make headlines with its financial performance and strategic positioning in the market. The company's AI revenue is projected to triple year-over-year to more than $12 billion in fiscal year 2024, despite recent guidance slightly below consensus estimates. This growth is primarily driven by an increase in demand for Broadcom's custom chips and networking equipment.
Broadcom's third-quarter revenue exceeded expectations at $13.07 billion, marking a significant year-over-year revenue increase of 47% to $13.1 billion. Furthermore, the company's VMware (NYSE:VMW) bookings are gaining momentum, with a $4 billion revenue target for the upcoming quarter, surpassing previous management expectations.
Analysts from firms such as JPMorgan, Piper Sandler, and Cantor Fitzgerald have expressed confidence in Broadcom's strategic positioning. JPMorgan has even increased its price target from $200 to $210. Additionally, Broadcom's financial outlook is robust, with industry-leading gross margins forecasted at 76% and operating margins at 59% for fiscal year 2024.
Broadcom has also made significant strides in software, particularly with VMware, achieving high software renewal rates and conversion/upsell to its VCF full stack solution.
InvestingPro Insights
As Broadcom Limited (NASDAQ:AVGO) garners attention with its recent performance and Rosenblatt's optimistic outlook, real-time data from InvestingPro offers additional context for investors. With a robust market capitalization of $711.36 billion, Broadcom's financial health and industry position are underscored by significant figures. The company's revenue growth over the last twelve months up to Q3 2024 stands at an impressive 32.04%, reflecting its ability to expand amidst challenging market conditions. Moreover, the gross profit margin during the same period is notable at 74.71%, indicating efficient cost management and a strong competitive edge within the semiconductor space.
InvestingPro Tips highlight that Broadcom has raised its dividend for 14 consecutive years, showcasing a commitment to shareholder returns. Additionally, analysts anticipate sales growth in the current year, which aligns with the positive revenue trends observed. For investors looking for deeper insights, InvestingPro offers several more tips, including detailed analysis on the company's valuation multiples and profitability forecasts.
These insights, coupled with Rosenblatt's buy rating and price target of $240.00, provide a comprehensive view of Broadcom's potential. For those seeking to make informed decisions, additional InvestingPro Tips are available at https://www.investing.com/pro/AVGO, offering a wealth of expert analysis on the company's outlook.
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