Fresh Highs On The Horizon For Broadcom Inc. Stock?

Broadcom Inc. stock (NASDAQ AVGO) is up to 2.5x since its March 2020 low. The current price of $480/share suggests that there are further upside opportunities. Broadcom stock rose to $480 from $190 in March 2020. This is much higher than the S&P’s 95% increase from its lows. Additionally, the stock is 1.5x more elevated than the level it was before the pandemic. Broadcom stock could still rise to $550 or more, based on our expectations of continued demand growth and strong Q2 2020 results. Our dashboard What Factors Caused 89% Stock Change Between 2018 And Now? The underlying numbers that underpin our thinking are available.

Broadcom is a producer and designer of semiconductors and infrastructure software products. They are used in various applications, including data centers, networks, broadband, wireless, and other related areas. Broadcom’s share price surge since 2018-end is due to an 18% growth in revenue (from $20.8 billion FY 2018 to $24.7 million over the past 12 months (Broadcom’s fiscal years end in October). Combining this with an approximately unchanged outstanding share count, Broadcom’s RPS (revenue/share) rose from $48.60 a $57.30 in the same period.

Broadcom’s Price-to-Sales ratio (price to sales) increased from 5.1x in 2018-end to 8.4x today due to rising demand for its products. We believe the company’s current P/S ratio will increase due to increased demand and a favorable shareholder-return policy. However, the stock price could still go higher.

Where are the Stocks Headquartered?

The global spread of coronavirus caused a decline in semiconductor demand in several industries. Broadcom’s Q2-2021 earnings show that the market has rebounded. Broadcom’s revenue for Q2 2021 was $5 billion, increasing $4.25 trillion in Q2 2020. Additionally, COGS fell, and operating expenses decreased, which resulted in operating income rising from $766m to $1.98billion. This drove EPS to grow from $1.23 – $3.46 in this period.

Additionally, we expect strong revenue growth for the company in the medium-term, given the lifting of global lockdowns and rising semiconductor demand, especially in the 5G segment. Broadcom could see its profitability rise if it continues to manage expenses. This will boost investor expectations and increase the company’s P/S multiplier. Broadcom stock is expected to rise nearly 15% from its current levels to $550.

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Robert Scoble
Robert is the assistant managing editor for HC News, overseeing coverage of markets, companies, strategy and business leaders. Originally from Boston, Scoble began his journalism career in 1997 & now resides outside New York.

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