After initiating a 10-for-1 stock split on July 12, Broadcom (NASDAQ: AVGO) is trading at a new price of $171.42 at the latest close, after adding 0.80% in the latest trading session, in contrast to losses of 2.52% experienced in previous five trading days.
The stock split doesn’t affect the company’s fundamentals and is purely an aesthetic move that aims to attract new investors and make the stock more affordable.
Analysts on Wall Street are particularly bullish on the semiconductor maker, with most of the price targets not yet factoring in the July 12 stock split.
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Wall Street is yet to factor in AVGO stock split into price targets
Currently, the Wall Street analysts have refrained from assigning new price targets for AVGO stock, with several exemptions.
Evercore ISI analyst Mark Lipacis lowered the price target on Broadcom stock to $201 from $2,010 while maintaining an “outperform” rating.
Lipacis explained that Broadcom’s 10-to-1 stock split, announced on June 12, 2024, and effective after markets close on July 12, 2024, prompted the adjustment. Broadcom began trading on a split-adjusted basis on Monday, July 15.
The new price target of $201 assumes a price-to-earnings ratio of 27.5x the 2027 EPS base case of $9, discounted back two years at a 10% hurdle rate.
While this P/E ratio is higher than the historical range of 10x-20x over the past 15 years, Lipacis believes it is justified due to Broadcom’s strong position as an artificial intelligence (AI) processor and networking chip provider.
Great optimism regarding Broadcom’s semiconductor market share
Oppenheimer analysts met with Broadcom executives on July 14 and maintained a bullish outlook on the stock following the company’s strong financial results.
Broadcom’s management highlighted their VMware strategy and significant progress in custom ASIC opportunities during the meeting.
Analysts at Oppenheimer attributed Broadcom’s leadership in custom ASICs to its extensive semiconductor IP cores, established relationships with major CSP platforms, and over a decade of specialized expertise.
Broadcom received a Wall Street high stock price target just before the stock split
On July 11, Rosenblatt raised its price target on AVGO stock to $2,400 from $1,650, marking a new Wall Street high.
This bullish upgrade preceded Broadcom’s 10-for-1 stock split as Rosenblatt’s FY26 estimates predict high-teens sales growth and $75 Non-GAAP EPS, fueled by ongoing AI infrastructure networking/ASIC momentum and improved synergies in enterprise software.
For FY24, the firm expects an upside to the recently raised sales target of $51 billion, driven by AI semiconductor sales making up over 40% of the mix and better VMware integration.
The firm praised Broadcom’s execution, highlighting significant growth in switching (Tomahawk 5 and Jericho 3), PCIe switches, and NICs.
Rosenblatt anticipates Broadcom will continue to benefit from strong demand for AI-focused semiconductors, especially in the networking and ASIC segments. The successful integration of VMware is also expected to impact the company’s performance positively.
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