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Broadcom might 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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Sturdy gross sales, a debt paydown, and profitable acquisitions ought to sustain the agency’s momentum, BofA mentioned.
Chip maker Broadcom seems to be 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 cut 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 word printed Thursday, analysts upgraded the agency’s value goal to $2,000, indicating about 18% upside from present ranges.
“We reiterate Purchase, think about 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 have been 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 12 months’s second quarter have been tied to AI merchandise, it mentioned.
Sturdy gross sales outlooks additionally helped Broadcom surge on Thursday, because it forecast $51 billion in gross sales this fiscal 12 months, barely above consensus.
Financial institution of America sees this momentum persevering with. For fiscal 12 months 2025, it raised its gross sales forecasts to $59.9 billion, or a 16% enhance year-over-year. Upside drivers will probably be semiconductor gross sales and Broadcom’s VMWare, a software program agency it acquired final 12 months.
“Second, we word AVGO’s debt paydown ($8bn+ annual) that would create extra room for additional M&A subsequent 12 months. Third, the double digit FCF development in FY24 may allow one other 10% dividend increase in the direction of the tip of the FY,” analysts wrote.
If Financial institution of America’s value goal pans out, that will 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, because of its central function within the AI wave.
Nvidia has damaged out to soar even larger in current months, becoming a member of Microsoft and Apple at the $3 trillion mark.
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