7. Broadcom Inc. (NASDAQ:AVGO)
Average Upside Potential: 15.42%
Number of Hedge Fund Holders: 158
Broadcom Inc. (NASDAQ:AVGO) is one of the 10 AI stocks that Jim Cramer and analysts are watching. On June 9, Barclays analyst Tom O’Malley raised the price target on AVGO shares to $265 from $215 and kept an Overweight rating. The firm stated that demand for artificial intelligence custom silicon remains strong. It also noted that Broadcom’s non-core end markets are showing signs of stabilization.
On the same day, Citi raised its price target on AVGO to $285 from $276 and maintained a Buy rating. The firm noted that the company reported mixed results and guidance. Strength in artificial intelligence was offset by lower margins, attributed to product mix and increased options expense. The firm stated that margins were guided lower due to a higher semiconductor mix. The firm noted that the company expects its AI business to grow 60% year-over-year in fiscal 2025 and 2026, supported by increased adoption.
It is worth noting that the company was mentioned by Cramer on June 9, as he stated:
“There’s nothing more frustrating than watching one of your favorite companies report a strong quarter only to see the market find some reason to send the stock lower, but in retrospect, these can be great buying opportunities. Just look at what happened to Broadcom last week… long-time Cramer fave, big holding in my Charitable Trust. But the stock sold off hard after the company reported on Thursday night…
Putting it all together, though, I think the main problem is that Broadcom stock had run up so dramatically from the April lows. Think about this trajectory. The stock bottomed at $138 in April. It was at nearly $260 before it reported last week. Under those circumstances, anything less than perfection was going to be punished. And while the quarter was very good, it certainly wasn’t perfect, which is why, despite the post-earnings sell-off, I still like the stock and think you may be getting a terrific buying opportunity here…. I think the bears are missing some even more important positives for the quarter, outside of just the headline numbers.
For starters, Broadcom’s AI revenues came in at $4.4 billion. That’s an increase of 46% from the previous year and up from the already impressive $4.1 billion just last quarter. While that was merely in line with expectations, it underscores that the company’s seeing the most enticing part of its business inflecting. I like this. This strength is coming from both parts of their AI business….. AI chip sales are expected to get to be $5.1 billion this quarter, and that’s up another $700 million sequentially, mind-boggling, $300 million more than the analysts were looking for.
That’s something. This would represent 60% growth for AI chips year-over-year. That’s amazing. This, you see, this is why it’s so hard for me to justify the pullback in Broadcom stock. They’re selling a stock that’s guided for AI semiconductor sales to come in $300 million higher than expected because they’re worried about the slow growth non-AI part of the business. That’s nuts…
… Broadcom paid out $2.8 billion in dividends last quarter, and on top of that… they spent $4.2 billion to repurchase 25.3 million of their own shares… Always good to see the company buying its stock right alongside. Here’s the bottom line: Contrary to the market’s reaction, there was plenty to like about Broadcom’s quarter, and the stock only sold off because some investors were expecting an insane blowout. Honestly, I’m more positive in Broadcom than I was before the report. And the fact that you can buy the stock at a discount here, I think it’s a steal.”
Broadcom (NASDAQ:AVGO) designs and provides semiconductor devices and software solutions for use in networking, broadband, wireless communication, data centers, smartphones, and industrial systems. The company’s technology is used in AI infrastructure, telecommunications, home connectivity, and enterprise computing.
