Broadcom Pre-Split: Buy / Sell ? Act Now !
2024 is a bumper year for US listed companies undergoing forward stock splits.
When it takes place, companies issue additional shares to current stockholders, lowering the stock price proportionally.
The stock split makes a listed company “accessible” to a wider range of investors interested in the stock, post split.
$Broadcom(AVGO)$ has scheduled its 10-for-1 stock split for after the close of trading on Fri, 12 Jul 2024.
Broadcom will trade on a split-adjusted basis as of opening bell on Mon, 15 Jul 2024.
Like $NVIDIA Corp(NVDA)$, this semiconductor & networking giant has benefited from artificial intelligence (AI) boom.
Boosting demand for its AI networking and custom accelerators, lifting its stock price and revenue - as a result.
YTD, the stock price has gained +59.32%; while past 12 months gain was a whooping +100.64%.
Stock price even surpassed $1,800 for a time in June 2024.
This top tech stock would make a solid long-term investment.
The lingering question though is - Should an investor get in on the shares before stock split on 12 Jul 2024 or after?
Case for “Before”.
A stock split does not change anything fundamental about a company or its stock.
Neither does it impact a company’s valuation, in any way either.
However, post-split, a stock could become more expensive.
This happened with Nvidia recently. Between the day it made its split announcement and the actual day of the event, the tech giant's shares climbed by nearly +30%.
Therefore, if an investor considers Broadcom a strong & long-term player, it would be a great idea to go ahead and buy the stock now rather than waiting for it to complete what is simply a piece of financial juggling.
Other two salient reasons to be optimistic about Broadcom are:
Strong AI-related demand.
Broadcom recent acquisition of cloud software company - $VMware(VMW)$, that is set to drive a new era of growth for the company.
In Broadcom’s Q2 2024 earnings:
Revenue rose +43% to more than $12 billion, due to above 2 reasons.
As it is still early days of the AI boom and VMware integration, there's likely a lot more synergistic growth to come.
VMware revenue contribution grew to $2.7 billion (Q2 2024) from about $2.1 billion (Q1 2024).
Management’s outlook is for it to reach a $4 billion quarterly revenue run rate.
Broadcom’s forecasts AI revenue for fiscal 2024 to be more than $11 billion.
Case for “After”.
The argument for buying after the split is obvious and straightforward.
It is due to investor’s budget.
At a lower price point, an investor will be able to buy into Broadcom shares and not fractional ones.
Summary.
Buy Broadcom before or after the split? Really depends on how much an investor wants to invest.
Budget permit: Buy now! Can get invested in this top AI company.
Insufficient budget: Wait until after the split. Will be able to buy whole shares more easily then.
On price changes before split?
Investors should not worry about short-term price swings when investing for the long haul (several years).
It is hard to predict the market perfectly. Just focus on buying a good company at a reasonable price.
Overall: Broadcom looks like a good buy for AI growth, regardless of the stock split.
With Nancy Pelosi increasing her stake in Broadcom (see above), it’s a winner alrighty !
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Usually up before spliting
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