2024-06-04 04:24:32 ET
Summary
- The S&P 500 Semiconductors industry trades at a historically high P/E multiple, nearly tripling from the valuation seen at times in 2019.
- Broadcom's valuation has likewise become stretched, and its momentum has slowed, prompting a downgrade from buy to hold.
- With very impressive free cash flow, AVGO stock's extensive semiconductor product portfolio and strong customer base provide fundamental tailwinds, but there are bearish risks to consider.
- I outline key price levels to monitor ahead of Q2 results due out next week and look at what the option's market is telling investors.
Sometimes it pays to take a step back to view just how far we have come during bull markets. It's a useful exercise for two reasons. First, as part of any good analyst's toolkit, insights can be gleaned from seeing what booms and busts have looked like during previous regimes. Second, opening the aperture helps to avoid nitpicking small corrective moves in an industry or theme....
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For further details see:
Broadcom: A FCF Machine, But Shares Near Fair Value Into Earnings, Momentum Weakens (Rating Downgrade)