What’s happening to Broadcom stock?

Broadcom Inc. (NASDAQ: AVGO), a provider of semiconductors, enterprise software and security solutions, saw shares rise over 40% in a week. This is due to better-than-expected earnings and outlook, followed by stock upgrades from some major Wall Street institutions.

Broadcom recently reported its fourth quarter fiscal 2024 results (the fiscal year ends in October), with revenue of $14.05 billion and profit of $1.42 per share, while beating consensus estimates at 14.09 billion US dollars and 1.38 US dollars respectively. Broadcom is seeing huge demand for its AI products, a trend that is expected to continue in the coming years. Let’s dive deeper into the company’s recent performance and the impact on its share price. Regardless, if you want an uptrend with a smoother trajectory than an individual stock, consider the following: High quality portfolio, The company has outperformed the S&P and has returned >91% since inception.

How did Broadcom perform in the fourth quarter?

Broadcom’s fourth-quarter revenue was $14.05 billion, up a whopping 51% year-over-year. This is due in part to the contribution of VMware, which acquired the company last year for $69 billion. In addition to VMware, Broadcom’s AI products also contributed to sales growth. The company’s AI revenue was $12.2 billion in fiscal 2024, representing a whopping 220% year-over-year growth, driven by strong demand for its AI XPUs (Broadcom’s custom AI accelerators) and Ethernet products. Broadcom is benefiting from the generative AI boom with its wide range of networking and storage solutions, cybersecurity and semiconductor offerings.

Broadcom also announced that it is developing AI chips with three major cloud companies, which reportedly include Google and Meta. The company’s forecast of $14.6 billion in the first quarter of fiscal 2025 also reflects strong year-over-year growth of 22%. Not only did the company post strong sales in the fourth quarter, its adjusted operating margin increased 90 basis points year-over-year to 62.7%. Higher sales and margin expansion resulted in a bottom line of $1.42 on an adjusted basis, compared to $1.11 in the year-ago quarter.

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What does this mean for AVGO stock?

Admirably, AVGO stock has delivered better returns than the broader market in each of the last four years. The stock’s return was 56% in 2021, -13% in 2022, 104% in 2023 and 104% so far this year. Likewise, the Trefis High Quality Portfolio with a collection of 30 stocks is significantly less volatile. And it has outperformed the S&P 500 every year in the same period. Why is that? As a group, the stocks in the HQ Portfolio offered better returns with lower risk compared to the benchmark index. less of a rollercoaster ride, as the key performance indicators of the HQ portfolio show.

Broadcom’s solid growth in its AI products and guidance prompted several Wall Street analysts to revise its stock price upwards. However, most estimates are now being met after a sharp increase of 40% in a week. At current levels of $250, AVGO stock now trades at 23 times trailing sales, while the stock’s average P/E ratio over the past three years has been 5. Now the company’s acquisition of VMware, the tremendous opportunities in generative AI with its chips and networking products, and strong profitability justify a significant upward revision to the valuation multiple. Following its recent rally, AVGO has now become the eighth stock to surpass $1 trillion in market cap. Notably, analysts’ average price estimate for AVGO stock of $226 suggests it is now fully valued.

Even though AVGO stock appears to be fully valued, it’s helpful to see how Broadcom’s colleagues Fare for important metrics. You can find further valuable comparisons for companies in all industries at Peer comparisons.

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