On Thursday, Truist Securities increased its price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) shares to $2,045, up from the previous target of $1,566, while reaffirming its Buy rating on the stock. The adjustment follows Broadcom's reported earnings for the ffirst quarter, which exceeded expectations, primarily driven by a significant increase in artificial intelligence (AI) revenue.
Broadcom's AI revenue reached $3.1 billion, marking a 35% growth quarter over quarter and a staggering 280% year over year, surpassing analyst estimates by 30%. This robust performance in AI sales was a key component in the company's overall success during the quarter. Despite this, some of Broadcom's traditional semiconductor markets, including enterprise storage, broadband, and industrial sectors, did not meet expectations, slightly dampening the impact of the AI revenue growth.
In light of these results, Broadcom has revised its full-year sales and EBITDA forecasts upward, which, according to Truist Securities, still seem conservative. The firm also adjusted its calendar year 2025 earnings per share (EPS) projection to $63.91, down from the previous estimate of $65.27. The new price target is based on a 32 times multiple, which is an 11 times premium to the S&P but is considered in line with Broadcom's peers.
Truist Securities continues to recommend buying Broadcom shares, citing the company's strong performance in AI, potential for dividend growth, and the benefits of mergers and acquisitions. The firm's outlook remains positive, despite the challenges of assigning a higher multiple to the stock, suggesting confidence in Broadcom's ongoing growth trajectory.
In other recent news, Broadcom Limited has seen a series of positive adjustments from analysts following a robust Q2 performance, with consolidated net revenue reaching $12.5 billion, marking a 43% increase from the previous year.
This surge was primarily driven by Broadcom's artificial intelligence (AI) revenue, which soared by 280% to $3.1 billion. Analysts from Cantor Fitzgerald, Citi, Mizuho, Baird, and Rosenblatt Securities have all raised their price targets for the company, reflecting confidence in Broadcom's market position and future prospects.
Broadcom's fiscal year 2024 AI revenue forecast has been increased from $10+ billion to $11+ billion, aligning with projections from various firms. In addition, the company 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.
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.
InvestingPro Insights
As Broadcom Limited (NASDAQ: AVGO) continues to impress with its first-quarter earnings, particularly in the AI sector, it's important to look at the company's financial health and market standing through the lens of InvestingPro data and insights. With a substantial market capitalization of $693.05 billion and a notable P/E ratio of 54.42, Broadcom stands out as a significant player in the tech industry. The company's revenue growth over the last twelve months, as of Q1 2024, is an impressive 12.94%, showcasing its ability to expand in a competitive market.
InvestingPro Tips highlight that Broadcom has raised its dividend for 14 consecutive years, signaling a strong commitment to shareholder returns. Moreover, analysts are anticipating sales growth in the current year, which aligns with the company's upward revision of its full-year sales and EBITDA forecasts. This financial optimism is reflected in the company's stock trading near its 52-week high, with a price percentage of 99.32% of the high watermark.
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