Broadcom could be the next stock to reach a trillion-dollar market capitalization, Bank of America said.
The chipmaker’s stock is rising after its quarterly profits beat estimates.
Strong sales, debt repayment and lucrative acquisitions should maintain the company’s momentum, BofA said.
Chip maker Broadcom appears to be a contender to become the next member of the stock market’s trillion-dollar club, Bank of America said Thursday.
Investors cheered the semiconductor maker in Thursday trading after it reported earnings that beat estimates and announced a 10-for-1 stock split. Shares soared, hitting an all-time high of $1,696 around 11 a.m. ET.
Bank of America thinks Broadcom has even greater potential, even after its big quarterly report. In a note released Thursday, analysts raised the company’s price target to $2,000, indicating an upside of about 18% from current levels.
“We reiterate Buy, consider it one of the best choices in AI (along with NVDA), as AVGO appears uniquely positioned to grow: 1) custom AI chips (complementing NVDA merchant accelerators ), 2) Ethernet networks (leveraged for exponentially growing AI clusters), and 3) VMware upsell (enables businesses to deploy on-premises AI),” the bank said.
Broadcom is part of a cohort of semiconductor makers that have been buoyed by the artificial intelligence frenzy because their chips are used to power underlying software. $3.1 billion in sales during the fiscal second quarter were related to AI products, according to the report.
A strong sales outlook also helped Broadcom jump Thursday, as it forecast revenue of $51 billion this fiscal year, slightly above consensus.
Bank of America believes this dynamic will continue. For fiscal 2025, it raised its sales forecast to $59.9 billion, an increase of 16% year-over-year. Driving the rise will be semiconductor sales and VMWare from Broadcom, a software company acquired last year.
“Second, we note AVGO’s debt repayment (over $8 billion per year) which could create more room for further M&A next year. Third, double-digit FCF growth at FY24 could enable an additional 10% dividend increase towards the end of the financial year,” the analysts wrote. .
If Bank of America’s price target comes to fruition, it would place Broadcom among an exclusive group of stocks with a trillion-dollar market cap. The latest member of the club is Nvidia, the semiconductor leader that has been propelled to dizzying valuations, thanks to its central role in the AI wave.
Nvidia has climbed even higher in recent months, joining Microsoft and Apple at the $3 trillion mark.
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