2024-06-17 12:49:50 ET
Summary
- Broadcom entered the hybrid cloud market with their VMware acquisition.
- Second quarter FY 2024 results beat estimates, with revenue growth driven by Artificial Intelligence and VMware.
- Although the stock sells at a premium valuation, there is still potential upside for long-term investors.
When I last discussed Broadcom Inc. ( AVGO ), the company was coming off a quarter that displeased investors. The stock dropped 7% after releasing its first-quarter fiscal year ("FY") earnings. I recommended buying the company because it is a huge potential beneficiary of the proliferation of Artificial Intelligence ("AI"). Since that recommendation, the stock rose 24.22%, compared to the S&P 500 Index ( SPX ) increasing 4%.
Broadcom recently reported its second quarter FY results that beat analysts' revenue estimates by around 4% and non-GAAP (Generally Accepted Accounting Principles) earnings-per-share ("EPS") estimates by 1%. Management also raised its annual revenue guidance. Generally, a guidance raise signals management's confidence in future growth. The company's most significant growth drivers during the quarter were AI demand and VMware (hybrid computing), which are both tremendous reasons to invest in this stock....
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Making The Case For Buying Broadcom Despite Its Higher Valuation