On Thursday, Broadcom Limited (NASDAQ:AVGO) saw its price target increased to $1,900 from the previous target of $1,625 by Mizuho, while the firm maintained a Buy rating on the stock. This adjustment comes in the wake of Broadcom's robust April quarter report and an upward revision of its fiscal year 2024 earnings guidance to $51 billion, which now anticipates a more significant contribution from its AI segment.
Broadcom reported that for fiscal year 2024, ending in October, it expects networking and AI to be the key revenue drivers, with projections for the segment to reach over $11 billion. This represents a substantial increase, nearly tripling from around $4 billion. Despite this growth, the company has forecasted a decline in its storage business by approximately 20% year-over-year, with the wireless segment remaining steady.
The company's updated revenue guidance of $51 billion for fiscal year 2024 reflects a 42% year-over-year increase. This figure includes an estimated $12 billion from VMware (NYSE:VMW). Broadcom also suggested that while semiconductor revenues excluding AI have likely reached their lowest point, the storage, broadband, and industrial segments may see softer year-over-year performance. Conversely, the AI and networking sectors are anticipated to grow by 40% year-over-year.
Broadcom's financial outlook is further bolstered by its leading gross margin (GM) and operating margin (OM) forecasts for fiscal year 2024, which stand at 77% and 59%, respectively. Additionally, the company's free cash flow (FCF) is expected to potentially expand to around $29 billion in fiscal year 2025. Based on these strong financial indicators and growth expectations, Mizuho has reiterated its Buy rating and raised its estimates and price target for Broadcom shares.
In other recent news, Broadcom Limited has been making headlines with its improved revenue outlook and robust growth in artificial intelligence (AI). The company's AI revenue is projected to surpass $11 billion, and a revised full fiscal year 2024 revenue guidance has been set at $51 billion. This positive adjustment comes after the company's selection for Google (NASDAQ:GOOGL)'s v7 Tensor Processing Unit, a significant development in its AI business.
This growth has led Baird, Rosenblatt Securities, Jefferies, and UBS to raise their price targets for the company, reflecting confidence in Broadcom's performance. The company's second-quarter consolidated net revenue reached $12.5 billion, marking a 43% increase from the previous year. This surge was mainly due to Broadcom's AI revenue, which soared by 280% to $3.1 billion.
These recent developments underscore Broadcom's robust growth in key areas, particularly AI.
InvestingPro Insights
Following the recent optimism from Mizuho about Broadcom Limited's (NASDAQ:AVGO) financial future, InvestingPro data provides additional context to the company's valuation and performance. Broadcom's market capitalization stands at a robust $693.05 billion, reflecting the substantial size and influence of the company in the semiconductor industry. The company's price-to-earnings (P/E) ratio, as of the last twelve months leading up to Q1 2024, is at 55.12, indicating high investor expectations for future earnings growth. Furthermore, Broadcom has demonstrated a strong revenue growth of 12.94% during the same period, underscoring the company's ability to expand its sales in a competitive market.
InvestingPro Tips highlight Broadcom's consistency in rewarding shareholders, having raised its dividend for 14 consecutive years, a testament to its stable financial position. Additionally, analysts are anticipating sales growth in the current year, aligning with the positive outlook presented by Broadcom for its AI and networking segments. With such solid financials and strategic growth areas, investors might find Broadcom an attractive stock, especially considering the high returns it has delivered over the past year. For those interested in deeper analysis, there are 16 additional InvestingPro Tips available for Broadcom at https://www.investing.com/pro/AVGO. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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