Broadcom stock (AVGO) is trading at a record high as investors anticipate its forthcoming earnings report. Moreover, the company's market capitalization has surpassed $667 billion, having increased by over 26% this year and over 410% over the past five years.
Broadcom Stock (AVGO) Key Strengths
Broadcom has achieved the status of the 11th largest company in the world by means of both organic growth and acquisitions. This includes Brocade in 2017, CA Technologies in 2018, Symantec in 2019, and VMware in 2023.
As a result of these acquisitions, Broadcom's revenue has considerably increased from $22.59 billion in 2019 to over $35.8 billion in 2023. Nevertheless, the company's debt has experienced a significant increase, from more than $30 billion in 2019 to more than $73.42 billion in the most recent quarter.
Broadcom has expanded its infrastructure software business to encompass areas such as cybersecurity, cloud infrastructure, and storage area networking as a result of the acquisitions. As a result, its free cash flow increased from more than $9.2 billion in 2019 to more than $17.6 billion in 2023.
Broadcom Earnings Reports: What Might Happen?
The earnings report scheduled for June 12th will catalyze AVGO's stock price. According to analysts, the company's revenue is expected to increase to $12 billion from $8.7 billion in the same quarter of 2023 and $11.96 billion in the previous quarter.
According to analysts, the VMWare acquisition and the ongoing AI trend are expected to drive Broadcom's revenue to $50.41 billion for the full year, a 40% increase from 2023.
However, despite its success, Broadcom is considered exceedingly expensive. Its forward P/E ratio is 73, higher than the sector median of 29, and its forward EV/EBITDA is 23, lower than the average of 14.
Broadcom's collaboration with Meta (META) includes co-designing Meta's first and second-generation AI training processors, which would be a crucial factor to look at. Broadcom is anticipated to increase the production of Meta's 3rd-gen AI chip (MTIA 3) in late 2024 and into 2025.
Analysts Opinion on Broadcom
JPMorgan analysts recently emphasized Broadcom's acquisition of the design contract for Google's TPU v7, the company's next-generation AI device. This marks the seventh iteration of AI processors Broadcom has developed in collaboration with Google, continuing their partnership.
JPMorgan anticipates Broadcom's revenue from Google's TPU program will exceed $8 billion this year, representing a 125% year-over-year increase. Due to the forthcoming TPU v5 and v6 processors in development, this figure is anticipated to increase to over $10 billion by 2025.
Analysts generally anticipate Broadcom's AI revenue will surpass $14 to $15 billion in 2025 and reach $11 to $12 billion this year. In that case, Broadcom would grab a significant market share as an AI semiconductor supplier.
AVGO Stock Forecast Technical Analysis
In the daily chart, the ongoing market pressure is bullish for AVGO, which is backed by a stable market. Any bullish opportunity could create a trend continuation signal above the multi-year high.
In the volume structure, the largest activity level is below the current price, supported by the bullish V-shaped recovery. However, the current price still trades below the 1445.22 resistance level, from where a valid breakout could be a trend trading signal.
In the major structure, the moving average wave consists of MA 150 to 250 suggesting a strong bullish signal as the current area is below the current price with a bullish slope. Moreover, the dynamic 20-day EMA is the immediate support, which is just below the current price.
Based on the current market structure, the current market of this stock is already at a record high, from where a stable market above the 1500.00 level could raise the price towards the 1585.06 level. Moreover, any upbeat earnings report could extend the momentum towards the 1823.02 area in the coming days.
The alternative scenario is to have bearish exhaustion from the current top with a daily candle below the 1325.06 high volume line, which could lower the price towards the 1000.00 psychological line.
