On Friday, Broadcom Limited (NASDAQ:AVGO) maintained its Overweight rating and $200.00 price target from Cantor Fitzgerald, despite a slight revenue forecast miss for the upcoming October quarter. The semiconductor company's updated full-year 2024 (FY24) revenue outlook of $51.5 billion fell short of the anticipated $51.75 billion or more. However, the October quarter guidance of $14.0 billion was just below the consensus of $14.1 billion and the previously estimated $14.2 billion.
The report provided reasons for optimism, highlighting the robust growth in AI revenues, with Accelerators and Ethernet AI sales up 350% and 400% year-over-year, respectively. The expansion of customer base in custom silicon, with names like META (NASDAQ:META) and Bytedance, and the correlation of Ethernet Networking growth with future GPU sales suggest a strong FY25 for AI, potentially exceeding 40% growth.
Non-AI semiconductor revenues appear to have stabilized, with an implied increase of about 12% quarter-over-quarter into October, despite being 32% below their previous peak. The company also noted that non-AI orders had grown over 20% year-over-year, which could signal a recovery in the next 6-12 months.
While these segments contributed to the slight shortfall in the October quarter guidance, there is an anticipation of future growth that could drive both top-line growth and gross margin improvements in semiconductors.
Broadcom's VMWare bookings are gaining momentum, with a $4 billion revenue target for the October quarter, surpassing previous management expectations for FY25. This acceleration is expected to continue into FY25.
Cantor Fitzgerald's analysis suggests that Broadcom's shares, trading at $142 after-hours, are undervalued, with potential for a rise in consensus estimates into calendar year 2025 (CY25). The firm envisions a clear path to an annualized earnings per share (EPS) run-rate exceeding $7 by the end of CY25 and surpassing $8 into CY26. Despite the market's current demand for perfection, the firm views the stock as a top pick and recommends buying on weakness, reiterating its $200 price target.
In other recent news, Broadcom Limited has been the center of several noteworthy developments. The company's recent financial results indicate a strong performance in the artificial intelligence (AI) segment, with JPMorgan (NYSE:JPM) increasing its price target from $200 to $210, and Piper Sandler maintaining a $200 target. This is primarily driven by a surge in demand for Broadcom's custom chips and networking equipment, leading to an increased fiscal 2024 AI revenue forecast of $12 billion.
Broadcom's third-quarter revenue surpassed expectations at $13.07 billion, despite a net loss of $1.88 billion due to a one-time non-cash tax provision. The company also reported a significant year-over-year revenue increase of 47% to $13.1 billion in the third quarter, including contributions from VMware (NYSE:VMW), and provided an optimistic revenue guidance for the fourth quarter.
Analyst firms such as JPMorgan, Piper Sandler, and a major financial firm have expressed confidence in Broadcom's strategic positioning and execution across its various business units. The company's diverse portfolio and product cycles are expected to support stable revenue growth, even amidst macroeconomic volatility.
InvestingPro Insights
In light of Broadcom Limited's (NASDAQ:AVGO) recent revenue forecast and Cantor Fitzgerald's continued optimism, it's pertinent to consider key financial metrics and expert insights. According to InvestingPro data, Broadcom's market cap stands at a formidable $711.36 billion. The company's P/E ratio is currently high at 65.11, reflecting a premium valuation in the market, which aligns with the firm’s status as a prominent player in the semiconductors industry. This is further evidenced by a significant revenue growth of 32.04% over the last twelve months as of Q3 2024, showcasing the company's ability to expand its financials robustly.
InvestingPro Tips indicate that Broadcom has consistently rewarded shareholders, raising its dividend for 14 consecutive years and maintaining dividend payments for 15 consecutive years, which could be a testament to the company's financial stability and commitment to returning value to investors. Analysts also anticipate sales growth in the current year, suggesting a positive outlook for the company's revenue trajectory. For investors seeking more comprehensive analysis, InvestingPro offers additional tips on Broadcom, providing a deeper dive into the company's financial health and future prospects.
These insights and data points underscore the potential for Broadcom's future growth and its position as a solid investment, as suggested by Cantor Fitzgerald's analysis and price target. With a well-established track record of performance and a promising outlook, Broadcom appears poised to continue its upward trajectory in the semiconductor space.
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