On Tuesday, Oppenheimer adjusted its outlook for Broadcom Limited (NASDAQ:AVGO), reducing the price target to $200 from the previous $2,000 while maintaining an Outperform rating on the stock. This significant change aligns with Broadcom's recent 10-for-1 stock split, which took effect on Monday, July 15, 2024.
The firm recalibrated its earnings per share (EPS) estimates for the calendar years 2024 to 2026 to $5.07, $6.10, and $6.86, down from $50.72, $61.00, and $68.56, respectively. This adjustment is purely a reflection of the stock split and does not indicate any other modifications to Oppenheimer's financial model for Broadcom.
Broadcom's latest earnings report showed an increase in the fiscal year 2024 revenue forecast, from $50 billion to $51 billion, buoyed by stronger than anticipated momentum in artificial intelligence (AI) revenue.
The company now expects AI revenues to surpass $11 billion this year, a substantial increase from the initial $7.5 billion projection at the start of the year.
The company's market share in custom compute ASICs is estimated to be over 75%, with significant sales to major tech firms such as Google (NASDAQ:GOOGL), Meta (NASDAQ:META), and ByteDance. Broadcom's long-standing partnership with Google on the Tensor Processing Unit (TPU), with the TPUv5 set to ramp up this year, and anticipated wins for TPUv6 and TPUv7, provides management with multi-year visibility.
Moreover, Broadcom's Tomahawk5 product is expected to reinforce the company's dominance in the top-of-rack (ToR) switching market. Despite non-AI sectors such as broadband, storage, and industrial experiencing a trough, these areas are poised for a recovery in the second half of the year.
Broadcom's diverse growth profile is underpinned by its leading positions in data center AI, networking, wireless, and software.
In other recent news, Broadcom Limited has seen significant developments. The company reported exceeding expectations in its second-quarter earnings, with sales of $12.49 billion and earnings per share of $10.96.
Additionally, Broadcom's AI-related revenue forecast was raised to over $11 billion for the current year. This comes on the heels of a 10-for-1 stock split that is set to take effect later this year.
Analyst firms, including TD Cowen, Evercore ISI, Rosenblatt Securities, Piper Sandler, Oppenheimer, and Wells Fargo, have adjusted their price targets for Broadcom, factoring in the recent stock split and the company's strong AI and VMware (NYSE:VMW) growth. Notably, TD Cowen maintained a Buy rating on Broadcom and raised the price target to $210.
Broadcom's recent acquisition of VMware is expected to contribute to its growth trajectory. The company has also released pro forma financials following the merger, providing stakeholders with a clearer picture of the combined entity's financial trajectory.
InvestingPro Insights
In light of Oppenheimer's recent price target adjustment for Broadcom Limited (NASDAQ:AVGO), it's worth noting some key financial metrics and analyst insights that could be of interest to investors. According to InvestingPro data, Broadcom boasts a robust market capitalization of $797.94 billion and has demonstrated impressive revenue growth, with a 21.62% increase over the last twelve months as of Q2 2024. The company's ability to maintain a high gross profit margin of 74.24% during the same period is indicative of its operational efficiency and strong market positioning.
InvestingPro Tips suggest that Broadcom's consistent dividend growth, with an increase for 14 consecutive years, is a testament to its financial stability and commitment to shareholder returns. Additionally, analysts anticipate further sales growth in the current year, reinforcing the company's growth trajectory. With a noteworthy performance, Broadcom has provided a high return over the last year, and its strategic focus on AI revenue is likely to continue driving its market share and profitability.
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