Broadcom Inc. (AVGO) Stock Analysis
Broadcom shares have rewarded investors with an increase of 100% from their 52 week lows, but the stock will be tested in early September on their next earnings report. The software and semiconductor giant has a long history of satisfying earnings, but pressure around the space has increased thanks to Nvidia’s stellar growth. Nvidia’s exponential earnings growth has only raised the bar for names like Broadcom, AMD, and other names within the industry, so Broadcom needs to beat both top and bottom estimates to move the needle.
Broadcom is well positioned to take advantage of the artificial intelligence boom. Their experience in the technology industry gives them an edge over start-ups, and their massive stream of revenue allows them to buyout competitors and produce better chips and applications.
The company’s full year revenue grew 43%, with the biggest surge coming from AI revenues at 280% to $3.3 billion. The artificial intelligence boom is only expected to grow, aiding this already successful company reach new heights through new products and software.
Broadcom’s present day valuation is around $746 billion, which would be considered expensive if it wasn’t for the latest growth trends they’ve posted. With revenue now growing at double digit percentage points again, markets will still see an opportunity because of the potential they have. Artificial intelligence revenue alone is expected to triple in the next 12 months, reaching around $11 billion per year for them. That, combined with all their other revenue streams, will likely justify the valuation in the coming months; however, it is imperative that AVGO continues to post strong growth to keep their buyers happy.
Option chain analysis:
Broadcom’s option chain expiring on September 6th (earnings are on September 5th) is currently reflecting an implied volatility reading of about 70%, which translates to about a projected move of $14.95 from the underlying stock between now and then. The direction of that move will depend on the earnings call and report.