Semiconductor stocks, crucial for powering artificial intelligence (AI) computing infrastructure, have seen notable success in the stock market this year, outperforming broader indices. Among the standout performers is Broadcom (NASDAQ:AVGO), a tech giant with a market cap of $473.4 billion. Despite its remarkable 2023 performance, analysts foresee more room for growth and continue to rate it a “Strong Buy.” Could Broadcom reach $1,200 per share in the coming year? Let’s delve into the details.
About Broadcom’s Strategic Evolution
Founded in 1961, Broadcom has evolved into a global leader in infrastructure technology, specializing in semiconductor and infrastructure software solutions for data centers, cloud computing, networking, and wireless communications. The company’s proactive approach to staying ahead of the tech landscape, including strategic acquisitions like CA Technologies and Symantec, has played a key role in its success. In 2023, 79% of Broadcom’s revenue came from semiconductors, and 21% from infrastructure software.
Recent Milestones and Acquisitions
Broadcom’s recent $69 billion acquisition of VMware in November enhanced its cloud capabilities and established a presence in the data management domain. As the second-largest AI chip company by revenue, Broadcom is well-positioned in the generative AI market, driven by strong demand from partners like Google.
Stellar 2023 Performance
In 2023, Broadcom’s stock surged by an impressive 107%, surpassing the VanEck Semiconductor ETF (SMH). The company’s stock not only offers a dividend yield of 1.84%, supported by consistent growth over a decade but also recently raised its dividend by 14.1%. The third-quarter earnings report exceeded Wall Street’s expectations, with revenues at $9.3 billion (up 4% YoY) and adjusted EPS of $11.06 (6% improvement).
Analyst Expectations and Valuation
Analysts are optimistic about Broadcom’s future, projecting forward revenue growth at 18.23% and forward EPS growth at 21.77%. Despite a significant rally, the stock remains reasonably valued, with a forward adjusted EPS multiple of 24x and a forward PEG ratio of 1.67 – a modest discount to the tech sector median.
Target Price and Analyst Ratings
Analysts maintain a “Strong Buy” rating on Broadcom, with a mean target price of $1,056.39. Recent notes from analysts at Citi and BofA Securities are particularly upbeat. Citi resumed coverage with a “Buy” rating and a price target of $1,100, emphasizing the potential doubling of sales from AI infrastructure in fiscal 2024. BofA Securities reiterated a Street-high target of $1,200, implying an expected upside of about 4.4% from current levels.
Out of 23 analysts covering the stock, 19 rate it as a “Strong Buy,” while 4 recommend a “Hold” – a slight improvement from the previous month. As Broadcom continues to demonstrate robust performance and strategic positioning in key tech sectors, the outlook remains promising for investors eyeing potential growth in 2024.
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