Broadcom (NASDAQ:AVGO), a prominent global technology firm, showcased an impressive performance last year, with its stock soaring by nearly 100%, outpacing the tech-heavy Nasdaq Composite’s gain of 44.5%. The company’s multifaceted business encompasses semiconductors and infrastructure software, contributing to its robust growth trajectory.

Notably, Broadcom is not only witnessing rapid expansion in revenue and earnings but has also strategically acquired assets to enhance its product lineup in the forthcoming years. With a strong finish to fiscal 2023 and promising prospects for fiscal 2024, investor interest in AVGO shares has already driven a 9.2% increase year to date.

The semiconductor industry, amid the artificial intelligence (AI) boom, is drawing optimism from Wall Street. Let’s explore whether Wall Street anticipates Broadcom’s continued ascent in 2024.

Beyond Semiconductors, Embracing Diversified Technological Innovation

While Broadcom derives a substantial portion of its revenue from semiconductor operations, it also boasts a significant presence in infrastructure software. Nonetheless, its impressive semiconductor Compound Annual Growth Rate (CAGR) of 18% over the past three years has been instrumental in propelling its revenue growth.

From fiscal 2015 to fiscal 2023, Broadcom witnessed a remarkable CAGR of 20% in net revenue and 15.5% in earnings. These figures elucidate the staggering 1,914% surge in AVGO’s share price over the past decade.

Before 2020, Broadcom strategically acquired Symantec’s Enterprise Security Business and CA Technologies to bolster its infrastructure software segment. Subsequently, the company remained relatively quiet on the acquisition front until last year, when it acquired cloud software company VMware for $61 billion in cash and stock. Over the next three years, this acquisition is projected to elevate infrastructure software revenue by 49% and generate $8.5 billion in pro forma EBITDA.

In fiscal year 2023, the Semiconductor Solutions segment witnessed a 9% revenue growth to $28.1 billion, constituting 79% of total revenue, while infrastructure software revenue experienced a 3% year-on-year increase. Overall, Broadcom’s total revenue escalated from $33.2 billion to $35.8 billion in fiscal 2023, with diluted earnings surging by 24% to $32.98 per share.

With the inclusion of the VMware acquisition, management anticipates consolidated revenue to reach approximately $50 billion in fiscal 2024, marking a 40% year-on-year increase. Although integration is expected to incur transition costs of at least $1 billion over a year, adjusted EBITDA is forecasted to comprise 60% of projected revenue.

Analysts project a 39% revenue growth to $49.8 billion and an 11% increase in earnings to $46.91 per share for fiscal 2024.

Navigating the Future Trajectory for Broadcom Stock

Broadcom presents an appealing proposition for growth and income-oriented investors as it also functions as a dividend stock, boasting a quarterly dividend yielding 1.9%, surpassing the tech sector average of 1.4%. Alongside its quarterly results, the company announced a 14% hike in its quarterly dividend to $5.25.

The company’s robust balance sheet recorded $14 billion in cash and cash equivalents by the fiscal year-end, coupled with $17.6 billion in free cash flow, poised to support future dividend payouts and AI investments.

With healthy free cash flow growth and a payout ratio of 37%, the potential for dividend growth aligns with earnings expansion.

Analysts anticipate a 10% rise in revenue and a 19% surge in earnings for fiscal 2025. Currently, AVGO trades at 22 times forward 2025 earnings and 10 times forward sales, presenting a reasonable valuation compared to its semiconductor industry peers.

Analysts’ Sentiments on Broadcom

Broadcom stock garners a consensus “strong-buy” rating from analysts, with 20 out of 24 analysts rating it as such, while the remaining four rate it as a “hold.”

Following the Q4 results, AVGO has exceeded its mean target price of $1,140.98. Its high target price of $1,325 suggests a potential upside of 8.5% from current levels.

Conclusion

Broadcom’s diversified product portfolio, coupled with advancements in AI and strategic acquisitions, positions the company for remarkable growth in the forthcoming years. With its reasonable valuation, investors may find this growth and income stock attractive for long-term holding.

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