CA - Broadcom: An Essential Company For AI Investors

2024-07-01 05:26:47 ET

Summary

• Broadcom is a key player in AI solutions with diversified offerings, high profitability, and potential for growth in semiconductor products.
• AI revolution is not the only secular shift that Broadcom can benefit from because it also has strong potential to capitalize on a projected 19.4% CAGR for the IoT industry.
• Intrinsic value calculations suggest that AVGO is currently trading at a discount, which is quite attractive for such a fundamentally strong company.

My thesis

Broadcom's ( AVGO ) AI-related revenue is soaring and is expected to represent more than a third of the total by the end of FY2024. This is a strong indicator of the company having strong AI exposure, and the market already knows it as the stock price almost tripled since January 2023. The company's intrinsic value is higher than the current market capitalization by 9%, and this potential upside might be unattractive for some investors. However, the DCF model is built on conservative assumptions and does not price in decrease in interest rates soon....

For further details see: