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Broadcom could possibly be the subsequent inventory to achieve a trillion-dollar market cap, Financial institution of America mentioned.
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The chipmaker’s inventory is surging after its quarterly earnings beat estimates.
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Robust gross sales, a debt paydown, and profitable acquisitions ought to sustain the agency’s momentum, BofA mentioned.
Chip maker Broadcom appears like a contender to be the subsequent member of the inventory market’s trillion-dollar membership, Financial institution of America mentioned Thursday.
Traders cheered the semiconductor producer in Thursday trades after it posted estimate-beating earnings and introduced a 10-to-1 inventory break up. Shares soared, hitting an all-time excessive of $1,696 round 11 a.m. ET.
Financial institution of America thinks Broadcom has even larger potential even after its huge quarterly report. In a notice revealed Thursday, analysts upgraded the agency’s worth goal to $2,000, indicating about 18% upside from present ranges.
“We reiterate Purchase, contemplate it a high AI choose (with NVDA) as AVGO seems uniquely positioned to develop in: 1) customized AI chips (complement to NVDA service provider accelerators), 2) Ethernet networking (levered to exponentially rising AI clusters), and three) VMware upsell (allows enterprise to deploy on-premise AI),” the financial institution mentioned.
Broadcom is amongst a cohort of semiconductor producers which were buoyed up by the bogus intelligence frenzy, as their chips are used to energy the underlying software program. $3.1 billion in gross sales in the course of the fiscal yr’s second quarter had been tied to AI merchandise, it mentioned.
Robust gross sales outlooks additionally helped Broadcom surge on Thursday, because it forecast $51 billion in gross sales this fiscal yr, barely above consensus.
Financial institution of America sees this momentum persevering with. For fiscal yr 2025, it raised its gross sales forecasts to $59.9 billion, or a 16% enhance year-over-year. Upside drivers will likely be semiconductor gross sales and Broadcom’s VMWare, a software program agency it acquired final yr.
“Second, we notice AVGO’s debt paydown ($8bn+ annual) that would create extra room for additional M&A subsequent yr. Third, the double digit FCF development in FY24 might allow one other 10% dividend increase in the direction of the top of the FY,” analysts wrote.
If Financial institution of America’s worth goal pans out, that might place Broadcom amongst an unique group of shares with trillion-dollar market capitalization. The membership’s newest member is Nvidia, the semiconductor chief that was catapulted into sky-high valuations, due to its central position within the AI wave.
Nvidia has damaged out to soar even greater in current months, becoming a member of Microsoft and Apple on the $3 trillion mark.
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