AVGO - Quarterly Earnings Winner ? Buy Now ?
$Broadcom(AVGO)$ is an integral link in the technology-hardware supply chain.
Other companies might get all the fame and glory, but investors should not overlook Broadcom stock, which could rally sharply if the company exceeds Wall Street’s expectations on 05 Sep 2024.
That is when Broadcom will be handing in their earnings report card.
Try not to assess Broadcom using traditional valuation metrics:
Eg. price-to-earnings ratios (P/E).
It can be misleading, as these don’t provide a complete picture.
Consider AVGO’s achievements and growth.
Prepare yourself for an upcoming event that should keep the critics and short sellers at bay.
Previous Grand-Slam Quarter.
It feels like yesterday that Broadcom delivered second-quarter fiscal 2024 results that could best be described as a grand slam.
Q2 2024 Earnings.
Revenue: came in at $12.49 billion vs $12.01 billion expected. Revenue it grew by +42.98% YoY.
AI-Revenue: was $3.1 billion, constituting approx. 24.82% of total revenue.
Earnings per share (EPS) non GAAP : was $10.96 vs. $10.84 expected. EPS grew by +6.2% YoY.
Net income: was $2.12 billion vs versus $3.48 billion in the year ago period. Net income fell by -39% YoY.
Cash dividend : AVGO announced a dividend of $5.25 per share; a handsome sum for a stock that was around $140 or $150.
Those were the major highlights for Q2 2024 earnings.
Other notable earnings items:
It’s adjusted EBITDA increased +31% to $7.4 billion.
Free cash flow (FCF): excluding restructuring and integration in the quarter, grew +18% to $5.3 billion.
Will AVGO be able to follow up with another set of comparable or better earnings next ?
Coming Quarter Earnings.
So far, Broadcom has a stellar track record of quarterly EPS beats.
Short sellers who have bet against the company lost their shirts repeatedly.
It is confirmed, on Thu, 05 Sep 2024 Broadcom will publish its Q3 2024 results.
Wall Street’s experts want to see Broadcom report EPS of $1.21 per share; that is higher than what they expected in recent quarters from Broadcom.
Investment Strategy.
With expectations set “sky high”, a prudent strategy would be:
Not to over-invest in Broadcom stock.
Prudent to maintain a reasonable position size, just in case high hopes lead to a letdown from Broadcom.
For all of full-year fiscal 2024, Broadcom expects its revenue to grow +42% YoY to approximately $51 billion.
According to $JPMorgan Chase(JPM)$, Analyst, Harlan Sur :
Broadcom is seen to potentially generate “$150 billion in cumulative AI revenue over next 5 years.”
So, a single quarter’s results should not be make-or-break for Broadcom.
What Now ?
High expectations of any US stock can be a double-edged sword.
It’s encouraging that Broadcom and Wall Street have high hopes for Broadcom.
On the other hand, there’s no need to over-invest in Broadcom, because there is no guarantee that the next earnings report will beat investors’ expectations.
FY 2024 Business Outlook
In its Q2 earnings report, (based on current business trends and conditions), the company has tentatively mapped out the followings for FY 2024, ending 03 Nov 2024.
This includes contribution from VMware.
Fiscal year 2024 revenue guidance of approximately $51.0 billion; and
Fiscal year 2024 adjusted EBITDA guidance of approx. 61% of projected revenue.
Compared to FY 2023 that was reported to be $35.8 billion.
This will be a +42.46% YoY growth, should the company meet the target.
Since Stock Split.
Broadcom underwent a forward “10-for-1” stock split on Fri, 12 Jul 2024 after market closed for the week.
Stock price immediately after split exercise, came to $170.07 per share.
On 05 Jul 2024, I had a post on AVGO before it undergone the split. Click here ! to read, if you like.
How has AVGO performed since split? (see below)
AVGO started trading from 15 Jul 2024 based on the new stock-split price of $170 per share.
And it had been on a downwards trend until 30 Jul 2024 when it spiked to $160.68 after.
It lost the momentum when US market caught a “recession” chill and lost grounds for the next week.
Broadcom was caught in the panic sell-off as well and fell to its lowest at $136.27 on 7 Aug 2024.
With the recessionary fear dissipating, dispelled by the latest 3 inflation reports of PPI, CPI and Retail sales, US market is once again on the mends.
Support & Resistance Levels.
(1) Technical Analysis.
Broadcom has an overall consensus of “Buy” rating.
However, based on technical analysis consensus, it is a “Sell” rating.
Based on its moving average, consensus is a “Strong Buy” rating.
(2) Resistance and Support levels.
Based on Thu, 15 Aug 2024’s closing price of $166.13, below are its resistance and support level.
Pivot point 1st Resistance level (high) - $168.42.
Pivot point 2nd Resistance level (high) - $170.71.
Pivot point 1st Support Point (Low) - $162.09.
Pivot point 2nd Support Point (Low) - $158.04.
Equally crucial, if $NVIDIA Corp(NVDA)$ coming quarterly earnings (on Wed, 28 Aug 2024) exceeds Wall Street’s expectations, that could have a positive rub-off effect on AVGO in the short terms, until it shows its cards in September.
Quite unlikely the support levels will come into play if US market sentiments continue to be positive.
Then again, when its about the US market, one can never be too sure - right !
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Do you think Broadcom will hand in a glowing report come September 2024 ?
Do you think Broadcom will recover to its $170 split price, underpinned by a positive sentiments US market ?
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Broadcomm is awesome. Great leadership, well diversified in Chips, Cybersecurity… Will definitely be one of the top tech stock for years to come!!
$200 before earnings is starting to feel like a real possibility!
bounced off the 200 day MA and pierced thru the 50 day MA...it is a buy signal!
Looking forward to AVGO earnings. Let's see if they reach a new all time high.
Pls "Re-post" so that more get to know. Tks! Rating is important (to me).
Consider "Follow me" and get first hand read of my Daily new posts? Thanks!). Tks!
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