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Broadcom AVGO shares have ripped more than +30% since the chip giant posted favorable results for its fiscal fourth quarter last Thursday. Setting a bullish tone, Broadcom has seen high demand for its custom artificial intelligence chips which have been crucial to powering AI data centers.
Cracking a $1 trillion market cap for the first time, investors may be wondering if the rally in Broadcom stock can continue.
Image Source: Zacks Investment Research
Broadcom’s Q4 Results
Thanks to its AI expansion, Broadcom’s Q4 sales increased 51% year over year to $14.05 billion although this slightly missed Zacks estimates of $14.06 billion. On the bottom line, Q4 adjusted net income came in at $6.96 billion or $1.42 per share. This edged the Zacks EPS Consensus of $1.39 and rose 28% from $1.11 a share in the comparative quarter.
Overall, Broadcom’s top line expanded 44% in fiscal 2024 to a record $51.57 billion as AI revenue more than tripled to $12.2 billion. Annual EPS increased 26% to $4.87 versus $3.86 per share in FY23.
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Optimistic Guidance & Outlook
As a key chip supplier to Apple AAPL, Broadcom CEO Hock Tan stated the company has also added two major hyper-scale data center customers. Attributed to such, Broadcom expects its fiscal first quarter revenue to increase 22% to $14.6 billion with the current Zacks Consensus at $14.55 billion (Current Qtr Below).
Furthermore, the chip giant projects AI revenue to soar 65% during Q1 to $3.8 billion. Based on Zacks estimates, Broadcom’s total sales are expected to expand 18% in FY25 and are forecasted to increase another 8% in FY26 to $66.07 billion. Optimistically, Broadcom thinks its AI business could bring in $60-$90 billion in annual sales by 2027.
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AVGO Performance & Valuation
Starting to challenge Nvidia’s NVDA market dominance, Broadcom stock has soared over +100% this year to vastly outperform the broader indexes.
Image Source: Zacks Investment Research
Trading around $241 a share, AVGO is at a 36.7X forward earnings multiple. While this is a premium to the S&P 500’s 25.7X, Broadcom stock trades beneath Nvidia’s 45.6X and is on par with their Zacks Electronics-Semiconductors Industry average.
Although Broadcom is at a fairly reasonable P/E multiple, AVGO does trade at premiums to the broader market in terms of other key valuation metrics as well, like many of its big tech peers.
Image Source: Zacks Investment Research
Bottom Line
Following such an extensive rally, Broadcom stock lands a Zacks Rank #3 (Hold). Thanks to high demand for its AI chips, Broadcom’s sales outlook has certainly become more appealing to long-term investors but more upside from current levels will likely depend on what is hopefully a trend of positive earnings estimate revisions in the coming weeks.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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