Broadcom (NASDAQ:AVGO) shares are up 2.7% in premarket Tuesday as Wall Street analysts continue to weigh in positively on the chipmaker’s outlook after the company's recent renewal of Apple’s contract.
KeyBanc analysts believe the Apple (NASDAQ:AAPL) contract renewal and generative AI demand are likely to support results and outlook. The analysts hiked the price target to $820 per share, from the prior $720.
The company is due to report Q1 earnings on Thursday.
“Street sentiment on the name is slightly positive given the generative AI demand trends and the recent renewal of AAPL's LTA, despite concerns related to a slowdown in cloud/enterprise/service provider capex and the impact to the Company's non-cancelable backlog,” the analysts said in a note.
Similarly, BMO analysts boosted the price target to $890 per share, a new Street-high.
“Broadcom is reporting earnings this coming week against a positive backdrop for a subset of semis in general and for the company in particular given the recent filing on its continuing relationship/agreement with Apple, and on AI, where we see Broadcom as one of the companies set to benefit from the increased spend,” they wrote.
In the meantime, JPMorgan analysts argue that Meta Platforms (NASDAQ:META) could become the next $1 billion AI chip customer for Broadcom.
“We believe that Meta will emerge as Broadcom’s next $1B/year cloud ASIC chip customer over the next 2 years,” the analysts wrote in a note.
JPM’s deep-dive analysis showed that Broadcom’s custom chip (ASIC) has continued to witness strong orders from big clients, including Alphabet (NASDAQ:GOOGL). AVGO previously said it projects $3 billion in ASIC shipments this year, a 50% increase compared to 2022.
“We believe recent order acceleration from Google for its TPU AI processors implies that Google’s TPU processor program alone could drive $3B + in revenues and implying upside to management’s prior cloud ASIC revenue target this year. We believe Google orders for shipments next year could drive over $4B in TPU chip sales to Broadcom (up 30-50% Y/Y),” they added.
Overall, the analysts see Broadcom as “a strong beneficiary of the trends towards more custom chip designs as large cloud titans/OEMs look to drive more performance/power/cost/ differentiation alongside their software frameworks.”
Analysts at BofA, CFRA, Susquehanna, and Oppenheimer also raised their numbers on AVGO stock in recent days.
Broadcom shares gained 11.5% on Friday.