On Friday, Morgan Stanley (NYSE:MS) maintained its Overweight rating on Broadcom Limited (NASDAQ:AVGO) and increased the price target to $180 from the previous $176. The firm's analysis indicates that while Broadcom's artificial intelligence (AI) growth is not linear, it remains robust. Despite the company's guidance a quarter ago, which suggested $11 billion in AI revenue for the fiscal year 2024 with no expected sequential growth in the third and fourth quarters, Morgan Stanley had projected a more optimistic $12 billion.
Broadcom's recent performance has confirmed the anticipated variability, showing that AI processor sales were relatively flat quarter-over-quarter. However, there was a slight uptick in the networking segment related to AI. This variability was expected, as the company had previously described its ASIC business as being uneven across different quarters.
The report highlighted that Broadcom's growth in the AI sector is still on track to nearly triple this year. Additionally, the firm anticipates that sequential growth will pick up again starting in October. Despite the fluctuations in quarterly revenues, the overall trend for Broadcom's AI business points to substantial growth.
Morgan Stanley's revised price target reflects confidence in Broadcom's AI business trajectory. The new target represents a modest increase but is part of a continuous positive outlook from the analyst firm on the semiconductor company's financial prospects related to its AI technology offerings.
In other recent news, Broadcom Limited has posted impressive financial results, with a significant emphasis on its artificial intelligence (AI) segment. Mizuho and Bernstein SocGen Group have reaffirmed their Outperform ratings, citing potential growth in AI revenue, which is expected to triple year-over-year to more than $12 billion in fiscal year 2024.
Furthermore, Cantor Fitzgerald has maintained its Overweight rating, pointing to robust earnings potential through 2026, and JPMorgan (NYSE:JPM) has increased its price target from $200 to $210, citing an upside in Broadcom's stock as AI demand surges.
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. Piper Sandler has reiterated its Overweight rating on Broadcom, highlighting the upside from AI and software growth. The firm expects the company to grow revenues while simultaneously reducing operating expenses and increasing leverage.
Broadcom's VMware (NYSE:VMW) bookings are gaining momentum, with a $4 billion revenue target for the upcoming quarter, exceeding previous management expectations. Analyst firms such as JPMorgan, Piper Sandler, and Cantor Fitzgerald have expressed confidence in Broadcom's strategic positioning, with JPMorgan increasing its price target from $200 to $210. Broadcom has also made significant strides in software, specifically with VMware, achieving high software renewal rates and conversion/upsell to its VCF full stack solution.
InvestingPro Insights
In light of Morgan Stanley's optimistic outlook on Broadcom Limited (NASDAQ:AVGO), current data from InvestingPro shows a company with a robust financial profile. Broadcom's market capitalization stands at a hefty $711.36 billion, underlining its significant presence in the market. The company's revenue growth has been impressive, with a 32.04% increase over the last twelve months as of Q3 2024, suggesting a strong demand for its products and services.
InvestingPro Tips highlight that Broadcom has a history of rewarding its shareholders, having raised its dividend for 14 consecutive years, which aligns with Morgan Stanley's positive assessment. Analysts also anticipate sales growth in the current year, which could be a driving factor behind the firm's increased price target. Additionally, with a substantial return of 78.28% over the past year, investors have enjoyed significant gains.
For investors looking for more insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/AVGO, which delve deeper into Broadcom's financial health and market position.
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