2024-06-17 04:59:26 ET
Summary
- Broadcom beats Q2 estimates, with revenue jumping 43% YoY and adjusted EBITDA surging 59% YoY.
- Bullish outlook for FY 2024 with revenue expected to reach $51 billion and EBITDA margin at 61%.
- Broadcom's commercial momentum remains bullish, driven by hyperscalers' shift towards increasingly diverse data center ecosystems and the growing demand for custom compute chips.
- While I still believe that Broadcom is poised to remain a key beneficiary of the GenAI CAPEX investment cycle, I feel that AVGO's valuation looks at >35x P/E and >20x P/B.
- As a function of valuation, I downgrade AVGO shares to "Hold" and set my target price at $972.
Broadcom (AVGO) (AVGO:CA) reported results for the second quarter on 13th of June, and broadly topped analysts' consensus: Revenue jumped 43% YoY, while adjusted EBITDA surged 59% YoY. Following the earnings announcement, AVGO shares surged by about 15%, to a record >$800 billion market capitalization. Broadcom stock has rallied more than 200% since I covered the stock in January 2023, assigning a "Buy" rating. While I still believe in the core thesis that Broadcom is a key beneficiary of the GenAI CAPEX investment cycle, I turn more pessimistic in the assessment about whether AVGO stock is a "Buy" -- mostly as a function of valuation, with shares trading at >35x P/E and >20x P/B. As a function of valuation anchored on a residual earnings model, I downgrade AVGO shares to "Hold" and set my target price at $972....
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Broadcom: Downgrading After 200% Rally