Broadcom stock price has surged by over 80% from its lowest point in April as most companies in the artificial intelligence sector rebounded. AVGP was trading at $250 on Tuesday, a few points below the all-time high of $265. Its market capitalization has jumped by over $1.17 trillion.
Broadcom’s business is thriving
Broadcom is one of the biggest players in the technology industry. It is a diversified company operating in areas like semiconductor solutions, infrastructure software, and servers.
It has grown organically and through acquisitions in the past few years. Its annual revenue has jumped from over $23 billion in 2020 to over $57 billion in the trailing twelve months.
Most of this revenue came from its recent acquisition of VMware, a company that provides virtualization and cloud computing solutions.
The most recent results showed that Broadcom has been doing well in the first quarter as demand for its AI solutions rose. Its revenue jumped by 25% in the first quarter to $14.9 billion, higher than the median estimate of $14.1 billion.
The company’s profitability accelerated during the quarter, with its net income rising to $5.5 billion, and adjusted earnings before interest tax, depreciatio,n and amortization (EBITDA) jumped to over $10 billion. Hock Tan, the CEO said:
“We expect continued strength in AI semiconductor revenue of $4.4 billion in Q2, as hyperscale partners continue to invest in AI XPUs and connectivity solutions for AI data centers.”
Growth and valuation
Analysts anticipate that Broadcom will continue growing this year as demand for AI solutions accelerates. This explains why other top AI companies like NVIDIA and CoreWeave have soared.
Yahoo Finance data show that the average revenue estimate among 33 analysts is $15.82 billion, a 21% surge from the same period last year. The most bullish analyst estimates that its revenue will cross the $16 billion level.
Broadcom’s revenue is expected to grow by 20% in the third quarter to $16.97 billion. Its annual revenue will be $62.7 billion, a 21.6% annual growth rate followed by $75.1 billion next year.
Analysts also anticipate that its annual earnings per share will move from last year’s $4.87 to $6.62 this year and $8.13 next year.
This growth trajectory can explain why the company trades at a premium valuation. It has a forward price-to-earnings ratio of 38, higher than the S&P 500’s 21. Wall Street analysts have a target price of $281, higher than the current $241.
Broadcom stock price technical analysis
AVGO stock price chart | Source: TradingView
The daily chart shows that the AVGO stock price bottomed at $138.36 in April to a high of $250. It has formed a V-shaped recovery or a cup-like chart pattern, a popular bullish continuation sign. It is forming the handle section of the cup-and-handle pattern.
Broadcom’s share price has remained above the 50-day and 200-day Exponential Moving Averages (EMA). It has formed a bullish pennant pattern, a popular continuation sign.
Therefore, the most likely scenario is where the stock jumps to $300, up by 20% above the current level. A move below the support at $235 will invalidate the bullish view.
Read more: Broadcom president sells AVGO shares: should you follow suit?
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