Buy Or Sell AVGO Stock Ahead Of Its Upcoming Earnings?

Forbes

2 days ago

SUQIAN, CHINA - MARCH 9, 2025 - An illustration photo shows the Broadcom LOGO displayed on a ... More smartphone in Suqian, Jiangsu province, China on March 9, 2025. (Photo credit should read CFOTO/Future Publishing via Getty Images)
Broadcom (NASDAQ:AVGO) is scheduled to report its earnings on Thursday, June 5, 2025. Historically, AVGO stock has often seen a positive reaction to its earnings announcements. Over the past five years, the stock has posted positive one-day returns in a strong 80% of instances, with a median gain of 2.9% and a maximum one-day jump of 24.4%.
While actual results will heavily influence stock performance, understanding these historical patterns can give event-driven traders an edge. Here are two main approaches:
Analysts project Broadcom to report earnings of $1.57 per share on sales of $14.97 billion. This marks a significant improvement from the prior year's quarter, which saw earnings of $1.10 per share on sales of $12.49 billion. This anticipated growth is expected to be fueled by the continued expansion of Broadcom's AI-related custom chips and Ethernet products. Investors will also be closely watching trends in custom ASIC sales.
From a fundamental standpoint, Broadcom currently boasts a market capitalization of $1.1 trillion. Over the last twelve months, the company generated $55 billion in revenue and was operationally profitable, with $19 billion in operating profits and a net income of $10 billion.
That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative - having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – Merck Stock's Ticking Keytruda Time Bomb.See earnings reaction history of all stocks
Some observations on one-day (1D) post-earnings returns:
Additional data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.
AVGO 1D, 5D, and 21D Post Earnings Return
A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves "long" for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.
AVGO Correlation Between 1D, 5D and 21D Historical Returns
Sometimes, peer performance can have influence on post-earnings stock reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on the past post-earnings performance of Broadcom stock compared with the stock performance of peers that reported earnings just before Broadcom. For fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.
AVGO Correlation With Peer Earnings
Learn more about Trefis RV strategy that has outperformed its all-cap stocks benchmark (combination of all 3, the S&P 500, S&P mid-cap, and Russell 2000), to produce strong returns for investors. Separately, if you want upside with a smoother ride than an individual stock like Broadcom, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.