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Why Broadcom Stock Was Moving Higher Today

Shares of Broadcom (NASDAQ: AVGO) were climbing Monday after the diversified chip stock got an analyst upgrade following its earnings report last week.

As of 12:55 p.m. ET, the stock was up 8.4% on the news, crossing the $1,000 per share level for the first time ever.

A tweezer picking up a computer chip.

A tweezer picking up a computer chip.

Image source: Getty Images.

Broadcom picks up support

In the wake of Broadcom’s fiscal fourth-quarter earnings report last week, Citigroup resumed its coverage of the company with a buy rating and a share price target of $1,100. Analyst Christopher Daniely noted strength in the core business and potential tailwinds from its recently closed acquisition of VMware.

The stock moved higher on the earnings report last week as the company said that revenue from AI would double from $4 billion in fiscal 2023 to $8 billion in fiscal 2024. Daniely said the growth in AI would offset challenges in the broader semiconductor business.

Can Broadcom keep climbing?

Like many of its peers in the semiconductor sector, Broadcom has faced headwinds from the downturn in the industry due to an inventory glut and slowing sales of personal computing devices like smartphones.

In its fiscal fourth quarter, which ended Oct. 29, revenue rose 4% to $9.3 billion, while adjusted net income was up 6% to $4.81 billion, or $11.06 per share. That compared to analysts’ consensus estimates for revenue of $9.41 billion and earnings of $10.98 per share.

CEO Hock Tan called the VMware acquisition “transformational,” and it’s expected to add $12 billion in revenue next year, bringing Broadcom’s forecast to $50 billion in revenue and $30 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

That guidance shows that Broadcom remains highly profitable even as the chip sector faces cyclical challenges. Though the company’s valuation has increased, the stock deserves to trade at a premium.

More From The Motley Fool

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has positions in Broadcom. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Why Broadcom Stock Was Moving Higher Today was originally published by The Motley Fool


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