Can Broadcom Replicate NVIDIA's Stock Split Success?

Value_investing
06-19

The stock split announcement drove $NVIDIA Corp(NVDA)$ 's share price up 27%, breaking through the $3 trillion mark and making it one of the big three in the U.S. stock market.

Clearly, investors are still pumped about the concept of stock splits!

On June 12th, $Broadcom(AVGO)$ , another chip giant, announced a 1-for-10 stock split along with stellar financial results, set to take effect on July 15th. This sparked a buying frenzy, and in just two days, its stock price soared 16%.

All in on Broadcom

Baird's Tristan Gerra kept his "Outperform" (Buy) rating and hiked the target price to $1,950 from $1,500, a 12% jump from last Friday's close.

Deutsche Bank's Ross Seymore maintained his "Buy" rating and upped his target to $1,900, citing strong AI growth and VMware's integration-driven second-quarter earnings surprise.

On Monday, Broadcom's stock closed up over 5.4% at $1,828, even surpassing NVIDIA's pre-split price. Its forward P/E ratio hit 36, indicating a robust valuation. As for the reason behind the stock split, Broadcom's management says it's to make investing and employee ownership easier.

Broadcom has split its stock three times since 1999, but none since its acquisition by Avago in 2016.

Growth potential in AI era

Besides its high stock price, Broadcom's growth potential in the generative AI era is also a major factor.

Remember when Broadcom acquired $VMware(VMW)$ late last year? That's been a major growth driver. In its second quarter, Broadcom's revenue grew 43% to $12.5 billion, but excluding VMware, revenue rose just 12%.

In addition, AI products generated $3.1 billion in revenue, accounting for about a quarter of the company's total revenue.

Thanks to strong AI demand, management raised its network revenue growth forecast to 40% from 35%, and full-year revenue guidance to $51 billion from $50 billion, with $11 billion of AI revenue.

Whether there's a stock split or not, Broadcom is a solid stock worth holding long-term. The company's M&A prowess and cost-cutting abilities are legendary, and VMware is likely to be no exception.

New Highs for Semi! Is Broadcom Next Nvidia?
Broadcom continued to jump after earnings and split news, closing above $1800 on Monday. Following in Nvidia's footsteps, Broadcom plans a 10-for-1 stock split after the market close on July 12. Besides Broadcom, TSMC, AMAT, MU, QCOM, and other semiconductor companies are also hitting new highs. ------------- Would you buy Broadcom before or after the stock split? Which semi stock do you hold or bullish? What's your target price for AVGO? Is it next Nvidia?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • GabrielleSusan
    06-19
    GabrielleSusan
    Awesome move by Broadcom with the stock split
  • KSR
    06-20
    KSR
    👍
  • Mitch8ham
    06-20
    Mitch8ham

    Great article, would you like to share it?

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