Actions of Broadcom (NASDAQ: AVGO) saw strong growth last month, rising 21% in June, according to data from S&P Global Markets Insights.
THE semiconductor specialist delivered strong financial results and made an announcement that boosted investor sentiment.
A hit and a boost thanks to the AI ​​revolution
Early last month, Broadcom kicked off the festivities with results for its fiscal second quarter, which ended May 5, and investors cheered. Revenue rose 43% year over year to $12.5 billion, resulting in adjusted earnings per share (EPS) of $10.96, an increase of 6%. The company beat Wall Street expectations on both the top and bottom lines, helping to send the stock higher.
The results were driven by accelerated adoption of generative artificial intelligence (AI), underscored by strong demand from its hyperscale cloud computing customers. Broadcom noted that AI-related revenue jumped 280% year over year to $3.1 billion and now accounts for 25% of the company’s total revenue.
It also joined the growing fraternity of companies that have launched stock splits to reduce the cost of their shares. NvidiaFor example, Broadcom announced a 10-for-1 stock split The deal is expected to take place later this month. After the market closes on Friday, July 12, shareholders will receive nine additional shares for every share they own. The shares will begin trading on a split-adjusted basis when the market opens on Monday, July 15. Management said the move is intended to “make ownership of Broadcom stock more accessible to investors and employees.”
The company still had some way to woo investors, raising its guidance following its strong financial results. Management now expects full-year revenue of $51 billion, up from $50 billion, and expects AI-related revenue of more than $11 billion. Additionally, CEO Hock Tan admitted on the earnings call that his AI guidance was conservative and likely a worst-case scenario.
Following the company’s stellar performance, Wall Street has been the scene of a wave of positive commentary. Since the release of Broadcom’s report, 20 analysts have revised upwards their price targets on the stock.
The most optimistic of them is Bank of America Analyst Vivek Arya, who maintained a buy rating on Broadcom shares and raised his price target to $2,150, the stock’s highest. That represents a 31% gain for investors from Monday’s closing price. The analyst estimates Broadcom will generate earnings of $69 per share by fiscal 2026, which would represent a forward price-to-earnings (P/E) ratio of 24, a discount to Broadcom’s 28-fold multiple. S&P 500.
A long runway of growth ahead
The proliferation of AI is just beginning, and Broadcom is uniquely positioned within the AI ​​ecosystem. The company’s custom accelerators, networks, switches, and Ethernet solutions are the first choice for seven of the eight largest hyperscalers, offering cloud and data center infrastructure services. These users have hardened their systems to meet the demands of generative AI.
This opportunity, combined with the attractive stock price, makes Broadcom stock a buy.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Bank of America and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Why Broadcom Stock Is Up 21% in June was originally published by The Motley Fool
