Broadcom’s Stock Climbs Over 40% in Just One Week

Broadcom Inc. (NASDAQ: AVGO), a leading provider of semiconductors, enterprise software, and security solutions, has experienced a remarkable 40% increase in its stock price over the past week. This surge follows the release of better-than-expected earnings and an optimistic outlook, leading to stock upgrades from several major Wall Street firms.

A Glimpse at Q4 Performance

In its Q4 fiscal 2024 report (ending in October), Broadcom posted revenues of $14.05 billion and earnings of $1.42 per share, aligning closely with the consensus estimates of $14.09 billion and $1.38, respectively. The company enjoyed a significant boost in Q4, with a 51% year-over-year revenue increase, thanks in part to its $69 billion acquisition of VMware last year. Additionally, Broadcom’s AI products played a vital role in this growth, generating $12.2 billion in fiscal 2024 alone, marking a staggering 220% y-o-y increase. This performance reflects the robust demand for its custom AI accelerators and Ethernet technologies.

Broadcom is also collaborating with three prominent cloud companies, reportedly including Google and Meta, to develop new AI chips. Looking ahead, the company anticipates revenues of $14.6 billion in Q1 fiscal 2025, forecasting a strong 22% year-over-year growth. Besides impressive revenue figures, Broadcom’s adjusted operating margin improved by 90 basis points to 62.7%. These factors contributed to an adjusted earnings per share of $1.42, up from $1.11 in the same quarter last year.

The Outlook for AVGO Stock

Broadcom’s stock (AVGO) has consistently outperformed the market over the past four years, delivering impressive returns of 56% in 2021, -13% in 2022, 104% in 2023, and another 104% so far this year. In comparison, the Trefis High Quality (HQ) Portfolio, which comprises 30 stocks, has also performed well, outpacing the S&P 500 each year during this same period. This portfolio exhibits lower volatility, providing smoother returns compared to the benchmark index.

Broadcom’s strong performance in AI and its promising future propelled several Wall Street analysts to revise their stock price estimates upward. Following the recent 40% stock rise, AVGO is currently priced at $250, trading at 23 times trailing revenues—less than its average price-to-sales ratio of 5 times over the last three years. The VMware acquisition and significant opportunities in generative AI make a case for a reevaluated valuation multiple. Consequently, AVGO has become the eighth company to surpass a $1 trillion market capitalization, though the $226 average target from analysts suggests that the stock might already be fully valued.

While the current valuation indicates a potentially plateauing stock, it is insightful to compare Broadcom with its industry peers on key metrics. For further comparisons across various industries, see Peer Comparisons.

[1] Returns as of 12/17/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.