Broadcom, IBD Stock Of The Day, Sets Up Ahead Of Earnings
Broadcom is the IBD Stock Of The Day as the fabless chipmaker and infrastructure software provider prepares to report its fiscal second-quarter results on June 5.
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Business Insider
11 hours ago
- Business Insider
Broadcom Stock (AVGO) Primed to Maintain Long-Term Uptrend as Indices Return to Mean
Broadcom (AVGO) presents a strong investment opportunity, driven by its strategic focus on value creation within the rapidly evolving advanced technology space. As a key enabler of AI, Broadcom goes beyond hardware—its high-margin ecosystem, powered by AI and enterprise software, adds significant long-term appeal. While the stock may appear expensive at first glance, its valuation is justified by the company's foundational role in AI infrastructure and the robust, secular growth trends it continues to ride. Confident Investing Starts Here: In terms of raw performance, AVGO stock has outperformed the market by a substantial margin over the past year. Further underpinning the bullish theme, broader U.S. stock indices such as the Dow Jones, Nasdaq, and S&P 500 are all back at their historic highs, having shaken off the macroeconomic shock of a U.S.-China trade war. Given the solid fundamentals and strong outperformance, I think AVGO serves as a superb addition to any investor's portfolio; I'm stoutly bullish. Broadcom Is a Next Generation Technology Enabler Broadcom's latest quarterly results underscore the flawless execution of its strategy. The company reported impressive revenue of $15 billion, up 20% year-over-year. AI Semiconductor sales surged 46% to $4.4 billion, while Infrastructure Software revenue reached $6.6 billion, marking 25% growth. Free cash flow reached $6.4 billion, accounting for 43% of revenue and representing a 44% year-over-year increase. Guidance for fiscal Q3 2025 further strengthens the bullish outlook. Broadcom projects $15.8 billion in total revenue, reflecting a 21% year-over-year increase. AI Semiconductor sales are expected to rise 60% to $5.1 billion, and Infrastructure Software revenue is projected to grow 16% to $6.7 billion. These results and forward-looking projections reflect Broadcom's consistent value creation and operational discipline. Under CEO Hock Tan's leadership, the company has demonstrated mastery in driving growth, executing strategic mergers and acquisitions, and optimizing internal efficiencies—all with a clear focus on long-term shareholder value. Broadcom Is Constructing an AI Infrastructure Fortress Broadcom sits at the heart of the AI boom, strategically investing in custom silicon and high-performance networking, both of which are foundational to the long-term economics of AI infrastructure. Major hyperscalers are increasingly relying on Broadcom's custom application-specific integrated circuits (ASICs) to power their AI workloads, and this reliance is poised to grow. CEO Hock Tan projects the current 60% year-over-year growth in AI semiconductor revenue will extend into Fiscal 2026, driven by the multi-year expansion of AI infrastructure, the rising complexity of AI models, and continued investment across both training and inference. Beyond custom silicon, Broadcom is a significant force in AI networking through its Tomahawk and Jericho switch families—critical technologies for interconnecting large-scale AI clusters. The Tomahawk 6, for example, delivers up to 102.4 terabits per second of switching capacity, enabling the performance demands of next-gen AI systems. AI networking, which already accounts for approximately 40% of Broadcom's AI revenue, is expected to grow sharply, and a year-over-year increase exceeding 170% in this segment would not be surprising. Broadcom Also Has a Software Profit Engine Despite initial skepticism, Broadcom's acquisition and integration of VMware has been a masterful example of disciplined, long-term value creation. Broadcom's strategy for VMware to become a high-margin, recurring software business is beginning to take shape. Broadcom has made significant strides in converting VMware's customers to a subscription-based business model. For example, greater than 87% of VMware's top 10,000 customers have adopted the VMware Cloud Foundation (VCF) subscription, with the conversion expected to occur primarily over the next 12-18 months. This change has significantly improved Broadcom's infrastructure software operating margins, which increased from 60% to 76% in Fiscal Q2 2025. I expect further margin improvement as the company continues to roll off legacy contracts and solidify its subscription base. Financial Masterplanning at Broadcom Broadcom exemplifies disciplined financial management, with robust free cash flow and strong returns on deployed capital forming the backbone of its investment appeal. In Fiscal Q2 2025, the company delivered a record $6.41 billion in free cash flow—an impressive 43% of revenue—and this level of cash generation is expected to persist. Free cash flow remains the engine that drives Broadcom's ability to invest, deleverage, and return capital to shareholders. Following its earnings release, Broadcom reduced its gross principal debt from $69.4 billion to $67.8 billion, reaffirming its commitment to maintaining a 2x debt-to-EBITDA ratio. Management has been clear: cash not allocated to dividends will be prioritized for debt reduction. At the same time, Broadcom continues to return capital to shareholders on a large scale. In Q2 alone, the company paid out $2.8 billion in dividends and repurchased $4.2 billion in stock. In April, the Board authorized a new $10 billion share repurchase program, which will run through the end of 2025, signaling strong internal confidence in the company's long-term prospects. As free cash flow accelerates and debt is further reduced, this disciplined approach could create a compounding effect on earnings per share. Should the stock experience a pullback to technical support levels, I believe it could present an attractive entry point toward achieving a 30% annual return target. Is Broadcom a Buy, Sell, or Hold? Broadcom has a consensus Strong Buy rating on Wall Street based on 27 Buys, two Holds, and zero Sells. The average stock price target for AVGO is $289.60, indicating a potential return of 18% over the next 12 months. I'm Staying Bullish on Broadcom In my view, the convergence of accelerating AI-driven revenue, expanding high-margin software contributions from VMware, and Broadcom's disciplined capital allocation creates a particularly compelling investment case. These factors form the core of my thesis for achieving an annual return in the 30% range over the coming years. While the company continues to actively pursue strategic acquisitions, it is also steadily building long-term value through foundational infrastructure and prudent financial stewardship. With strong momentum, exceptional leadership, and a clear growth runway, Broadcom stands out as a high-quality opportunity in a transformative sector.
Yahoo
21 hours ago
- Yahoo
Zacks Investment Ideas feature highlights: NVIDIA, Innodata and Broadcom
Chicago, IL – June 11, 2025– Today, Zacks Investment Ideas feature highlights NVIDIA NVDA, Innodata INOD and Broadcom AVGO. The AI trade has jumped back into favor over recent weeks following some strong quarterly releases, with AI favorites such as NVIDIA, Innodata and Broadcom all seeing big gains. For those interested in momentum, let's take a closer look at each. NVIDIA Remains Stellar We've all been accustomed to NVIDIA's recent story, with its historical growth fueled by unrelenting demand for its Data Center products. The tech titan continued to fire on all cylinders throughout its latest release concerning its Data Center, with sales of $39.1 billion up 73% from the $22.5 billion print in the same period last year. As shown below, NVDA's Data Center results have regularly blown away our consensus Data Center expectations over recent periods. CEO Jensen Huang again provided a bullish statement in the latest release, stating – "Global demand for NVIDIA's AI infrastructure is incredibly strong. AI inference token generation has surged tenfold in just one year, and as AI agents become mainstream, the demand for AI computing will accelerate. Countries around the world are recognizing AI as essential infrastructure — just like electricity and the internet — and NVIDIA stands at the center of this profound transformation." The stock overall still reflects one of the strongest AI plays out there, with shares also not overly expensive. Shares currently trade at a 30.1X forward 12-month earnings multiple, a fraction of the 106.3X five-year highs and well beneath the 50.0X five-year median. The current PEG ratio works out to a fair 1.1X, again well beneath five-year highs and the five-year median. Innodata Sees Triple-Digit Growth Innodata is a global data engineering company that provides a range of transferable solutions, platforms, and services for Generative AI / AI builders and adopters. Like those above, Innodata has been enjoying supercharged growth, with sales of $58.3 million throughout its latest period climbing 120% year-over-year. Importantly, the company reiterated its FY25 revenue growth guidance of 40% or more, a critical announcement given the all-around uncertainty lingering stemming from tariffs. Many companies were unable to provide or reaffirm guidance outlooks throughout the Q1 cycle, but Innodata cleared the crucial hurdle. Analysts have maintained their bullish sales outlooks following the release, with the $242 million in sales expected for its FY25 up more than 50% over the last year. Broadcom Reports Record Sales Broadcom is evolving a broad portfolio of technologies to extend its leadership in enabling next-generation AI infrastructure. This includes foundational technologies and advanced packaging capabilities aimed at building the highest performance, lowest power custom AI accelerators. The stock currently sports a favorable Zacks Rank #2 (Buy), with its earnings outlook inching higher across several timeframes over recent months thanks to strong quarterly results. Concerning its latest quarterly release just last week, AI revenue of $4.4 billion moved 46% higher year-over-year. The quarter's results were driven by robust demand for its AI solutions, with the company forecasting AI semiconductor revenue of $5.1 billion for its Q3. Notably, AVGO posted a record $15.0 billion in sales, which grew a strong 20% year-over-year. Its cash-generating abilities also saw a nice boost, with free cash flow of $6.4 billion also reflecting a record and climbing 44% year-over-year. The AI trade has jumped back into favor recently, with all three companies above seeing big gains over the past month. All three companies posted strong results in their latest quarterly releases, with the positivity driven by red-hot demand stemming from the AI frenzy. For those seeking momentum paired with AI exposure, all three provide precisely that. Why Haven't You Looked at Zacks' Top Stocks? Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year. Today you can access their live picks without cost or obligation. See Stocks Free >> Media Contact Zacks Investment Research 800-767-3771 ext. 9339 support@ Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit information about the performance numbers displayed in this press release. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Broadcom Inc. (AVGO) : Free Stock Analysis Report Innodata Inc. (INOD) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
a day ago
- Yahoo
Jim Cramer on Broadcom (AVGO): 'I'm Not Buying the Bear Case'
We recently published a list of . In this article, we are going to take a look at where Broadcom Inc. (NASDAQ:AVGO) stands against other stocks that Jim Cramer discusses. Cramer started his 52-week high list with Broadcom Inc. (NASDAQ:AVGO) as he commented: 'It's important to realize, though, that tech's not well-represented in the 52-week hot list. In fact, there was only one big one, that's Broadcom, which reported a small top and bottom line beat after the close with solid guidance for the current quarter. But the stock is just getting hammered in after-hours trading. Now, I think the stock simply came in too hot, given how much it's run from the April lows. I'm not buying the bear case, which is based on some narrower margins on custom-made chips that it does. It's just that tech stocks are under pressure and Broadcom wouldn't be spared today whether it reported or not, and people should recognize that instead of freaking out. It's up 12% for the year.' A technician working at a magnified microscope, developing a new integrated circuit. Broadcom (NASDAQ:AVGO) develops and supplies a wide range of semiconductor devices, including custom chips for networking, wireless communication, broadband, storage, and industrial applications. Overall, AVGO ranks 1st on our list of stocks that Jim Cramer discusses. While we acknowledge the potential of AVGO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock. READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires. Disclosure: None. This article is originally published at Insider Monkey.
