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$Broadcom(AVGO)$ is expected to release earnings on Dec 07, 2023 after the market closes (AMC).

Broadcom's forecast for the current period is disappointing, indicating that demand for electronic components remains sluggish.

The outlook shows a slowdown in Broadcom spending, despite the boom in artificial intelligence stimulating demand in some parts of the industry. Broadcom is a manufacturer of key components for Apple's iPhone, but iPhone sales have declined.

Although Broadcom dominates the semiconductor market in helping guide communication between large data center computers, expenditures in this area have always been uneven.

Artificial intelligence is seen as a highlight. Broadcom CEO told investors last quarter that he expects revenue related to the artificial intelligence market to grow rapidly and soon account for over a quarter of sales.

Recently, Broadcom CEO pointed out that large cloud computing providers have a healthy demand for next-generation technology.

One more item that would be looked at by investors would be VMware acquisition is expected to add $15 billion/year to top line and estimates >9% EPS accretion.

Broadcom (AVGO) Earnings Historical

After last reported earnings on 31 Aug 2023, Broadcom shares declined -5.5% the day following the earnings announcement to close at 867.79.

Following its earnings release, 97 days ago, AVGO stock has drifted +5.2% higher. From the time it announced earnings, AVGO traded in a range between 795.09 and 999.87. The last price (913.12) is closer to the higher end of range.

Broadcom (AVGO) Upcoming Earnings Guidance

AVGO has issued earnings guidance for Q4 2023. Revenue is estimated at 9.27 B, which would be a 4% increase from the same period last year. The expected increase will be the slowest since 2020.

Broadcom (AVGO) Historical Moves Ahead of Earnings

AVGO stock had mixed performance leading up to earnings. Shares of Broadcom traded lower, on average, in the three day, two day, and one day periods heading into an earnings report. The best performance was two weeks ahead of earnings for an average gain of 2.3%

Broadcom (AVGO) Historical Stock Price Reaction to Earnings

AVGO shares have moved higher in the immediate aftermath of earnings 9 out of 12 previous reports. On average the stock moved up 1.7% in the first day of trading after the company reported earnings.

Broadcom (AVGO) Stock Behavior After Earnings

Based on the previous 12 earnings releases, AVGO is more likely to trade lower 1 day after earnings for an average loss of -1.1%

Broadcom (AVGO) Post Earnings Announcement Drift

AVGO share price has drifted up 5.2% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is 7.2%. The current drift represents a positive 0.5 standard deviation move.

• Current post earnings announcement drift: 5.2%

• Historical average post earnings announcement drift: 7.2%

• Historical post earnings drift standard deviation move: ±10.8%

Broadcom (AVGO) Post Earnings Movement

The options market overestimated AVGO stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±4.0% on average vs an average of the actual earnings moves of 3.1% (in absolute terms).

Broadcom (AVGO) Earnings Implied Volatility Crush

AVGO's last earnings implied volatility (IV30) going into earnings was 33.7. The last time AVGO released earnings, the implied volatility dropped to 27.0, resulting in an implied vol crush of 20%. 5 days after earnings, the 30 day IV was 25.4. You can compare how AVGO implied volatility changed around earnings for the last 12 quarters.

• Average Implied Volatility Crush For AVGO Earnings: 16%

• Average 30 Day Implied Volatility 1 Day Before Earnings: 35.7

• Average AVGO 30 Day IV for the Day of Earnings: 29.7

• Average 30 Day Implied Volatility 5 Days After Earnings: 29.6

Broadcom (AVGO) IV Percentile Rank

AVGO implied volatility (IV) is 29.8, which is in the 50% percentile rank. This means that 50% of the time the IV was lower in the last year than the current level. The current IV (29.8) is -11.3% below its 20 day moving average (33.6) indicating implied volatility is trending lower.

Broadcom (AVGO) IV vs 20-Day HV

The current IV (29.8) in AVGO is 1.4% above its 20 day HV (29.4) suggesting that options markets are predicting future volatility to trade above the most recent 20 day realized volatility.

Broadcom (AVGO) Seasonal Volatility by Day of Year

Historically, implied volatility for AVGO tended to rise the most in February with a median IV Of 34.5, while July tended to be when implied volatility declined To its lowest levels With median IV Of 26.2.

Historically, the median IV for the current month of December was 30.6 compared to the current IV of 29.8. The IV level in January following December tended to be lower, with a median IV of 29.5

Broadcom (AVGO) Volatility Skew

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls. If the implied volatility for downside puts is increasing relative to upside calls, then that suggests the market is pricing in a larger fear to a downside move.

The current skew indicator show bullish signal.

Summary

Based on the data gathered, Broadcom sales might be affected by sluggish demand for its chips, but with the VMware acquisition, we might see Broadcom revenue stream having some benefit from it.

I am expecting maybe Broadcom would be adjusting their guidance. But I would be monitoring how Broadcom trade on 07 Dec before its earnings release.

Appreciate if you could share your thoughts in the comment section whether you think Broadcom revenue would beat estimate despite pessimistic forecast for Q4 financial quarter, with chip demand still sluggish.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.