On Tuesday, Citi reiterated its Buy rating on Broadcom Limited (NASDAQ:AVGO) stock with a price target of $1,560.00. The firm anticipates Broadcom to outperform market expectations in its upcoming third-quarter fiscal year 2024 earnings, scheduled for release after market hours on Wednesday, June 12.
The optimistic outlook is attributed to an increase in artificial intelligence (AI) sales, which account for 22% of the company's fiscal year 2024 sales, and benefits from the recent acquisition of VMWare.
Broadcom had previously increased its fiscal year 2024 AI revenue forecast from approximately $8.0 billion to over $10.0 billion during its February quarter earnings report. Citi expects another upward revision in the AI revenue forecast to exceed $11 billion, driven by the ramp-up of a third AI customer. The firm's confidence in Broadcom is bolstered by the strength in AI sales and the expected earnings per share (EPS) accretion following the VMWare acquisition.
Broadcom's strategic move to acquire VMWare is seen as a significant contributor to its financial growth. The acquisition is expected to enhance Broadcom's portfolio and create new opportunities in the software domain, complementing its already robust hardware offerings. The integration of VMWare is projected to provide long-term earnings growth and shareholder value.
The company's focus on AI is a key factor in its performance, with sales in this segment showing robust growth. Broadcom's ability to secure and expand its customer base in the AI market is a testament to its competitive position and technological capabilities. The anticipated raise in AI revenue guidance suggests that Broadcom is continuing to capture a larger share of the AI market, which is rapidly expanding as industries adopt AI technologies for various applications.
Investors and market watchers are now looking forward to Broadcom's forthcoming earnings report, which will provide further insights into the company's financial health and the impact of its strategic initiatives on its overall performance. The guidance provided by Broadcom during this report will be critical in assessing the company's trajectory for the remainder of the fiscal year.
"In other recent news, Broadcom has been the focus of several recent developments. The company's second fiscal quarter of 2024 earnings report is eagerly anticipated, with BofA Securities maintaining a Buy rating and a price target of $1,680.00, in line with a full-year sales outlook of approximately $50 billion.
In addition, Morgan Stanley (NYSE:MS) has resumed coverage on Broadcom, assigning an Overweight rating, influenced by the company's potential in the Artificial Intelligence (AI) sector following its acquisition of VMWare. Melius Research has also initiated coverage on Broadcom with a Buy rating, highlighting growth potential from its Networking division and stability from its software business.
Broadcom recently introduced a new line of 400G PCIe Gen 5.0 Ethernet adapters, aimed at enhancing data center efficiency and supporting the growing bandwidth demands of AI-driven data centers. Furthermore, the company announced the expansion of its global software distribution efforts through the Accelerate Program, aiming to enhance service levels for a broader range of Broadcom software products across various regions.
These developments are part of Broadcom's ongoing efforts to meet the evolving needs of data center infrastructure and AI, as well as enhancing profitability and margin opportunities for its distributor and reseller partners."
InvestingPro Insights
As Broadcom Limited (NASDAQ:AVGO) gears up for its third-quarter fiscal year 2024 earnings release, investors can glean valuable insights from InvestingPro's real-time data and expert analysis. With a robust market capitalization of $667.54 billion, Broadcom's financial strength is evident. The company's commitment to shareholder returns is highlighted by its impressive track record of raising its dividend for 14 consecutive years, a testament to its stable cash flow and financial health. Furthermore, analysts are optimistic about Broadcom's sales growth in the current year, which is expected to be fueled by its strong performance in the AI sector and synergies from the VMWare acquisition.
InvestingPro data also reveals a significant 12.94% revenue growth over the last twelve months as of Q1 2024, underscoring the company's ability to expand its top-line amidst a dynamic market. Additionally, Broadcom's gross profit margin stands at an impressive 74.24%, indicating efficient operations and a strong pricing power. These metrics, combined with a 1-year price total return of 82.57%, paint a picture of a company that is not only growing but also rewarding its investors handsomely.
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