On Thursday, a Melius analyst increased the price target for Broadcom Limited (NASDAQ:AVGO) shares to $2,050 from the former target of $1,850, while reaffirming a Buy rating on the stock. The revision reflects an optimistic outlook based on anticipated higher revenues from artificial intelligence (AI) within the semiconductor sector.
The analyst's updated forecast for Broadcom's financial performance includes a modest elevation in estimates, with expectations for the company's earnings per share (EPS) for fiscal year 2024 (FY24) to rise to $48.61 from the prior estimate of $47.75.
This adjustment accompanies a predicted revenue growth of 43% to $51.1 billion, marking an 8% increase when excluding the impact of the VMware (NYSE:VMW) acquisition. The projection for the third fiscal quarter of 2024 (F3Q24) sets the EPS at $12.05, up from the previous $11.72, with revenues remaining consistent at $12.7 billion.
Looking further ahead, the analyst has also revised the EPS estimates for fiscal year 2025 (FY25) to $59.81 from $58.61, based on an anticipated revenue growth of 17% to $60 billion, an increase from the earlier forecast of $59.5 billion.
For fiscal year 2026 (FY26), the EPS estimate has been adjusted to $68.49 from $67.18, with revenue growth expected to be 10% to reach $65.7 billion, compared to the former estimate of $64.9 billion.
The new two-year price target of $2,050 is grounded on a 30 times multiple of the firm's FY26 EPS estimate, which has been set higher due to the faster growth anticipated in AI-driven revenues.
This revised target reflects the analyst's confidence in Broadcom's growth trajectory and its ability to capitalize on the expanding AI segment within the semiconductor industry.
In other recent news, Broadcom's first quarter earnings exceeded expectations, primarily due to a significant increase in artificial intelligence (AI) revenue, which reached $3.1 billion. This represents a 280% year-over-year increase, surpassing analyst estimates by 30%.
Truist Securities, Cantor Fitzgerald, and Citi have all increased their price targets for Broadcom, following strong financial performance and a solid financial forecast.
Broadcom has revised its full-year sales and EBITDA forecasts upward, which many analysts view as conservative. The company's fiscal year 2024 AI revenue forecast has been increased from $10+ billion to $11+ billion. Despite a forecasted decline in its storage business, Broadcom anticipates a recovery in server storage connectivity in the latter half of the year.
The company's fiscal year 2024 revenue guidance has been revised upwards to $51 billion, anticipating a significant contribution from its AI segment. Additionally, Broadcom announced a 10-for-1 stock split scheduled to take effect later this year, a move expected to increase stock liquidity and accessibility to a wider range of investors. These recent developments highlight Broadcom's robust growth in key areas, particularly in AI.
InvestingPro Insights
Broadcom Limited's (NASDAQ:AVGO) commitment to growth and shareholder returns is evidenced by its impressive track record of raising its dividend for 14 consecutive years. With analysts expecting sales growth in the current year, the company's strategic positioning in the AI sector is poised to potentially enhance its revenue streams. Notably, Broadcom has been trading at a high earnings multiple, which reflects the market's confidence in its future performance.
InvestingPro Data highlights a robust market capitalization of $693.05 billion and a P/E ratio of 54.42, indicating strong investor interest. The company has also demonstrated a solid gross profit margin of 74.24% over the last twelve months as of Q1 2024, underscoring its efficiency in maintaining profitability amidst industry challenges. Additionally, Broadcom has shown a significant price total return of 79.19% over the past year, signaling robust market performance and investor optimism.
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