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On Friday, UBS analysts increased the price target for Broadcom Limited (NASDAQ:AVGO) stock to $290 from $270, maintaining a Buy rating. The semiconductor giant, currently valued at $1.22 trillion, is trading near its 52-week high of $265.43. According to InvestingPro analysis, the stock appears overvalued at current levels, despite showing impressive revenue growth of 40.3% over the last twelve months. The adjustment follows positive commentary on AI demand during a recent call, which suggests a potential revenue growth for 2026 that is approximately 10% above market expectations.
The UBS analysts noted that Broadcom’s earnings per share (EPS) for 2026 could reach around $9, with projections for 2027 potentially hitting $10. The company maintains impressive gross profit margins of 76.26% and has demonstrated strong financial health, earning a "GREAT" overall score from InvestingPro’s comprehensive analysis. Despite these optimistic forecasts, the analysts mentioned that current investor expectations already align with these figures, which may limit any immediate significant upward movement in the stock price, particularly given the stock’s current P/E ratio of 116.5x.
In the near term, the analysts highlighted a potential decrease in gross margins related to Google (NASDAQ:GOOGL)’s TPU v6p ramp-up. However, they expressed confidence in Broadcom’s long-term prospects, particularly as the company is expected to benefit from providing custom ASICs and Ethernet solutions for hyperscaler customers.
Broadcom’s existing dominance in the market positions it well to capitalize on the scaling of large heterogeneous compute clusters, according to the UBS report. The company is anticipated to play a crucial role in linking these clusters, leveraging its expertise in Ethernet technology.
The UBS analysts’ revised price target reflects their positive outlook on Broadcom’s strategic opportunities and growth potential in the AI sector, despite some near-term challenges. For investors seeking deeper insights, InvestingPro offers an extensive analysis with 20+ additional expert tips and a comprehensive Pro Research Report, providing valuable context for Broadcom’s position in the rapidly evolving semiconductor landscape.
In other recent news, Broadcom has reported solid earnings results for the April quarter, meeting expectations and slightly surpassing guidance for the July quarter with projected revenue of approximately $15.8 billion. The company’s AI semiconductor revenue is expected to increase significantly, with projections indicating a 60% year-over-year growth, reaching $5.1 billion in the upcoming quarter. Analysts from firms like Mizuho (NYSE:MFG), Piper Sandler, Morgan Stanley (NYSE:MS), Evercore ISI, and KeyBanc have raised their price targets for Broadcom, reflecting confidence in the company’s strong AI outlook and growth potential. Mizuho set a target of $310, Piper Sandler at $300, Morgan Stanley at $270, Evercore ISI at $304, and KeyBanc at $315. Broadcom’s AI segment, including XPUs and AI Networking, has shown robust performance, contributing to the company’s positive financial outlook. The company expects continued growth in its AI semiconductor segment into fiscal year 2026, driven by expanding demand and new customer additions. Broadcom’s infrastructure software segment, particularly through VMware, has also contributed to its revenue growth. Analyst firms have maintained positive ratings, such as Outperform and Overweight, indicating strong confidence in Broadcom’s future performance in the AI sector.
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