On Friday, Broadcom Limited (NASDAQ: NASDAQ:AVGO) received a notable increase in its price target from Piper Sandler, now set at $250.00, up from the previous $200.00. The firm maintained its Overweight rating on the stock.
The adjustment follows Broadcom's report of a robust fourth quarter and positive guidance for January. With a market capitalization of $844 billion and trading near its 52-week high, InvestingPro analysis indicates the stock is currently trading above its Fair Value. The company's focus on its artificial intelligence (AI) segment was highlighted as a key driver of growth.
Broadcom's AI business has seen substantial revenue growth, soaring from approximately $3.8 billion in 2023 to an estimated $12.8 billion in FY24. The company's overall revenue growth remains impressive at 32% over the last twelve months, with an excellent Financial Health Score of 3.05 according to InvestingPro, which offers 15 additional key insights about the company.
This surge contrasts with a reduction in its non-core business, which has experienced a pullback exceeding 20% during the same period. Piper Sandler's outlook on Broadcom is reinforced by this momentum in the AI sector.
The company has outlined a Serviceable Available Market (SAM) ranging from $60 billion to $90 billion with its three existing AI customers, a significant leap from the current $15 billion to $20 billion. It is important to note that this projection excludes potential business from two new customers that have not been announced yet. The estimated SAM encompasses networking and various AI chips, including GPUs from merchant vendors.
Piper Sandler's reaffirmation of the Overweight rating is rooted in Broadcom's strong performance and the clear path to continued revenue growth. The firm's analysis points to the expectation that Broadcom's strength in the AI market will persist at a rapid pace, underpinning the company's multi-year growth prospects through 2027.
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