Broadcom Pre-earnings Analysis

Broadcom Inc.

Chart done on hourly timeframe. Broadcom’s rally and performance over the past twelve months has been eclipsed by Nvidia’s strong rally, but the company has proven to be a strong name in the semiconductor industry for years. AVGO is largely known to be a major supplier for Apple, specifically their 5G components. The two companies announced a massive multiyear deal in 2023 and committed to invest billions of dollars in U.S. grown suppliers, since then the U.S. government has also committed billions to homegrown chips. A trusted name like Broadcom is bound to benefit off these commitments, especially with demand for semiconductors rapidly increasing. 

Unfortunately there are headwinds that Broadcom can face this quarter, largely from slowing iPhone demand. Apple being their number one customer is a good thing for them, but it can also hurt them when Apple sees slowing sales. Apple’s biggest challenge over the last 12 months has been iPhone sales, so this may impact Broadcom’s earnings and outlook. 

Broadcom’s involvement in semiconductors may save it this quarter if they can beat expectations, but it will be hard to impress investors after Nvidia’s astronomical numbers. AVGO’s profits are expected to fall this quarter, so even if they meet expectations, it won’t be enough. They likely need to post a number above the 10.00 EPS to move the needle, otherwise they could face a correction. 

Options chain analysis:

AVGO’s option chain expiring on July 19 2024 currently reflects an implied volatility reading of 40%, which translates to about a $153 move from the underlying stock between now and then. The direction of that move will depend on their earnings outcome and call.