On Friday, Broadcom Limited (NASDAQ:AVGO) retained its Outperform rating and a stable price target of $190.00 according to Mizuho. The firm's recent report highlights Broadcom's consistent AI revenue growth and raised forecasts for fiscal year 2024.
The company's guidance for the October quarter is set at $3.5 billion, marking a 10% sequential increase, with AI revenue expected to triple year-over-year to more than $12 billion, up from a previous estimate of more than $11 billion.
Broadcom's networking segment is anticipated to surge over 40% year-over-year in the October quarter, acting as the primary growth driver. Conversely, other semiconductor sectors excluding AI, such as storage, broadband, and industrial, are projected to see declines in the same period, with year-over-year decreases in the high-single digits, 40%, and 20%, respectively. For fiscal year 2024, revenues excluding AI could potentially drop over 20% from the previous year.
The wireless division is forecasted to remain stable year-over-year and to experience a greater than 20% quarterly increase, attributed to the release of the iPhone 16. However, the firm suggests that stronger sales may be more prominent in the January quarter. Infrastructure software for the October quarter is guided to improve by 3% sequentially, bolstered by the performance of VMware (NYSE:VMW) and an EBITDA target of $8.5 billion that is expected to be reached ahead of schedule.
Broadcom's financial outlook is robust, with industry-leading gross margins (GM) and operating margins (OM) forecasted at 76% and 59% for fiscal year 2024. Free cash flow (FCF) is projected to potentially grow to approximately $21 billion in fiscal year 2025. Based on these assessments, the firm has adjusted its estimates and reaffirmed its positive outlook and price target for Broadcom.
In other recent news, Broadcom Limited has been experiencing significant growth in its artificial intelligence (AI) segment, with an increased fiscal 2024 AI revenue forecast of $12 billion. This surge is primarily driven by a rise in demand for the company's custom chips and networking equipment. Despite a net loss of $1.88 billion due to a one-time non-cash tax provision, 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.
Broadcom's VMware bookings are gaining momentum, with a $4 billion revenue target for the upcoming quarter, surpassing previous management expectations. Analyst firms such as JPMorgan (NYSE:JPM), Piper Sandler, and Cantor Fitzgerald have expressed confidence in Broadcom's strategic positioning, with JPMorgan increasing its price target from $200 to $210.
The company has also made significant strides in software, particularly with VMware, achieving high software renewal rates and conversion/upsell to its VCF full stack solution. The company introduced VMware Tanzu Platform 10 and Tanzu AI Solutions, aimed at simplifying cloud-native application development, and launched a new initiative called Catalyst to enhance its Accelerate Program by engaging elite Enterprise Security Group partners.
InvestingPro Insights
In light of Mizuho's positive outlook on Broadcom Limited (NASDAQ:AVGO), it's worth noting some key metrics and insights from InvestingPro that can provide additional context to the company's financial landscape. Broadcom's market capitalization stands at a significant $711.36 billion, reflecting the company's substantial presence in the industry. While the P/E ratio is relatively high at 65.11, this can be indicative of market expectations for future earnings growth, aligning with the analysts' anticipation of sales growth in the current year—an InvestingPro Tip worth considering.
InvestingPro data also shows a robust revenue growth of 32.04% over the last twelve months as of Q3 2024, which supports the report's mention of Broadcom's consistent AI revenue growth. Additionally, the company's gross profit margin is impressively high at 74.71%, underscoring Broadcom's industry-leading efficiency and profitability. It's also notable that Broadcom has maintained dividend payments for 15 consecutive years, with a dividend yield of 1.37% as of the last dividend date, showcasing its commitment to returning value to shareholders.
For investors seeking a deeper dive into Broadcom's performance and future prospects, InvestingPro offers a comprehensive array of additional tips—14 in total, including insights on profitability and market valuation multiples. These tips, accessible at InvestingPro's dedicated Broadcom page, can help investors make more informed decisions by considering a broader set of financial indicators.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.