Broadcom (AVGO) Post-earnings Update & Stock Analysis

Broadcom (AVGO) Post-earnings Analysis

Despite ambitious targets, Broadcom managed to beat quarterly earnings on Thursday and surpass estimates; however the stock is down in after-hours. The decline in the stock could be because the company’s leading product growth was in their software revenue, not their chip revenue. Markets are extremely bullish right now, but the biggest movers have been the companies reporting strong artificial intelligence chip growth, and even though Broadcom did that, it wasn’t enough for investors. Nonetheless, the semiconductor giant still reported a great quarter overall, coming in at $10.99 earnings per share and giving a guidance of $50B for the full year. 

Long term outlook:

Across the board, semiconductor companies are trading at expensive multiples, far above the healthy 15-25. Broadcom in specific is trading at a 41 P/E multiple, higher than the average, but much cheaper than competitors like Nvidia and AMD. For now, markets are excited about semiconductors and AI, so there’s a chance of a higher push, but eventually a correction will bring these stock prices to more reasonable multiples. 

Technical analysis:

The after-hours move on Thursday brought shares of AVGO to a low of around 1280.00 before it bounced, so we’ve placed a support at that level. Buyers need to defend that going forward to avoid a sell-off below it. The closest resistance on AVGO is their all time highs level at 1438.17.