Should You Buy Broadcom Ahead of Earnings?

Chipmaker Broadcom is expected to report higher earnings and revenue in the fiscal first quarter, which could help the stock recover its recent losses.

With the global shortage of chips, the price hike and the continued strength in markets such as electric vehicles and mobile devices, the semiconductor industry has gained strength.

The semiconductor manufacturer is expected to report earnings per share of $6.59 in the fiscal first quarter, which represents year-over-year growth of over 14% from $5.78 per share seen in the same period a year ago.

The San Jose, California-based semiconductor manufacturer would post revenue growth of nearly 14% to $7.6 billion from $6.6 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

At the time of writing, Broadcom stock traded 2.88% higher at $586.68 on Wednesday. The stock fell nearly 12% so far this year after surging more than 51% in 2021.

Analyst Comments

“Broadcom (AVGO) is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec,” noted Joseph Moore, equity analyst at Morgan Stanley.

“While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in an enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

Broadcom Stock Price Forecast

Twenty-three analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $689.18 with a high forecast of $750.00 and a low forecast of $615.00.

The average price target represents an 18.92% change from the last price of $579.51. Of those 23 analysts, 20 rated “Buy”, three rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $723 with a high of $937 under a bull scenario and $577 under the worst-case scenario. The investment bank gave an “Overweight” rating on the semiconductor manufacturer’s stock.

Several analysts have also updated their stock outlook. Barclays raised the target price to $700 from $650. Piper Sandler lifted the price objective to $750 from $680. Baird upped the price target to $690 from $550.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator gives a strong buying opportunity.

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