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On Friday, Morgan Stanley (NYSE:MS) analysts raised the price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) stock to $270 from $260, maintaining an Overweight rating. This adjustment reflects the firm’s confidence in Broadcom’s position in the AI sector, bolstered by the potential addition of up to four new customers. The stock, currently trading near its 52-week high with a market capitalization of $1.22 trillion, has demonstrated remarkable strength with an 88% return over the past year. According to InvestingPro analysis, Broadcom’s current valuation appears elevated based on its Fair Value calculations.
The analysts noted that Broadcom appears to be one of the least controversial names in the AI space, thanks to its solid market position and the updated 2027 Serviceable Addressable Market (SAM) projections. They highlighted that AI currently represents around 10% of NVIDIA (NASDAQ:NVDA)’s data center numbers, with a slight increase anticipated in July due to NVIDIA’s shortfall in China. InvestingPro data reveals Broadcom’s impressive gross profit margins of 76.26% and robust revenue growth of 40.3% in the last twelve months, underlining its strong market position.
Despite Broadcom’s strong performance, the analysts expressed a preference for NVIDIA’s growth prospects in the ASIC market during the second half of the year. They acknowledged that while both stocks are attractive, NVIDIA’s potential for price target growth is seen as more appealing.
The new price target for Broadcom is based on a 40x multiple on the company’s estimated earnings per share for the calendar year 2026, which includes stock-based compensation. This is slightly higher than the previous 39x multiple, reflecting increased visibility for AI advancements next year.
Morgan Stanley emphasized Broadcom’s compelling long-term outlook and ambitious SAM, indicating confidence in the company’s growth trajectory within the AI sector.
In other recent news, Broadcom Inc. reported strong financial results for the second quarter of 2025, surpassing earnings expectations with an earnings per share (EPS) of $1.58, slightly above the forecast of $1.57. The company achieved record revenue of $15 billion, which exceeded the anticipated $14.95 billion, marking a 20% year-on-year increase. Broadcom’s artificial intelligence (AI) segment played a significant role, with AI Semiconductor revenue surging by 46% year-on-year. Looking ahead, the company projects third-quarter revenue of $15.8 billion and anticipates AI Semiconductor revenue to grow by 60% year-on-year. Several analyst firms have adjusted their price targets for Broadcom, driven by the company’s strong AI growth prospects. Evercore ISI raised its price target to $304, KeyBanc increased it to $315, Deutsche Bank (ETR:DBKGn) adjusted it to $270, and HSBC set it at $240. These adjustments reflect confidence in Broadcom’s AI business trajectory and overall financial outlook, even as some analysts note challenges in non-AI semiconductor areas.
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