JamesOoi: Earnings Preview--Could Broadcom Sustain His Stunning Bull Run?

Below is a recap of analyst @Tiger_James Ooi ‘s webinar, “Could Broadcom sustain their stunning bull run?”

Please click here to watch the full webinar replay on Tiger Brokers App.

Read more>>

JamesOoi: Earnings Preview,Could Nvidia Sustain It’s Stunning Bull Run?

$Broadcom(AVGO)$ is expected to report its earnings on 5th of September, after the market closes.

• Broadcom is one of my favorite AI stocks, but it is underappreciated by investors in the past due to the expensive share price

• Broadcom had been trading above $400 since 2021 and it was trading at $1,600 right before the 10-for-1 share split on 12th July.

• It's currently trading at $165 post-stock split, making it more affordable and likely to attract more investor interest.

• Broadcom is a global technology company that designs, develops, and supplies a broad range of semiconductor and infrastructure software solutions for data centers, networking, broadband, wireless, and storage markets.

• One of the key reasons Broadcom offers so many products is Broadcom acquired a lot of companies in the past.

• Broadcom also has a history of laying off employees, selling off unprofitable products, and raising prices after acquisitions.

• Generally, the forecast for the end July quarter is quite positive.

• Revenue is expected to grow by 46% year-over-year while operating income is expected to grow by 100% yoy in the latest quarter.

• Broadcom has one of the highest profit margins in the tech industry.

• Aside from networking, other semiconductor solutions like wireless, storage, broadband, and industrial have been providing flat or negative year-over-year growth for the past four quarters.

• Networking, which accounts for 30% of the total revenue, increased by 46% yoy in the latest quarter.

• The reason networking is growing so fast is that it is closely related to AI development

• The networking solutions are all about making sure devices can connect and communicate quickly, efficiently, and reliably.

• Networking: Broadcom currently has a commanding 80% market share in the datacenter/AI Ethernet switching and routing chipset market. In addition, Broadcom also helps hyperscalers custom-make AI chips, and currently holds about 60% of the market share in the custom AI chip sector.

$Broadcom(AVGO)$ holds around 60% of the custom chip market.

• In a recent earnings call, Broadcom mentioned having three major ASIC customers. Google and Meta are widely known; the third is speculated to be ByteDance (TikTok's parent company).

• Nvidia's AI chips are high-performing but expensive, with a 3-4 month wait time.

• Some hyperscalers are turning to custom chips to reduce dependency on Nvidia.

• Broadcom assists in designing these custom chips.

• The ASIC chip market is valued at $20-$30 billion, with Broadcom holding a 55%-60% share.

• Broadcom's ASIC revenue is projected to grow at a 71% CAGR from 2024 to 2026.

$Broadcom(AVGO)$ is a top AI "picks and shovel" play due to its significant AI revenue.

• Broadcom’s AI revenue as a percentage of total semiconductor revenue has been growing:

• 2023: AI revenue was 15% of total semiconductor revenue.

• 2024: Expected to rise to 35%, a 160% year-over-year increase from $4 billion to $11 billion.

• The $11 billion AI revenue estimate might be conservative; AI revenue was $5.4 billion in the first two quarters of 2024.

• With the current 53% and 35% quarter-over-quarter growth rates in the first two quarters of 2024, AI revenue could exceed $11 billion this year if Broadcom can maintain the same growth rate.

The current analyst consensus 12-month target price for Broadcom is $193.27, representing an upside potential of 16.6% compared to the August 22nd closing price of $165.78.

• In conclusion, I favor Broadcom and Nvidia as they are long-term beneficiaries of AI.

• Nvidia currently offers the best AI chip, and companies not using Nvidia's AI chips risk falling behind in AI development.

• However, due to Nvidia's premium pricing, some companies are exploring custom-made AI chips, and this is where Broadcom comes in.

• Companies like Meta, Alphabet, and likely ByteDance are turning to Broadcom to reduce their reliance on Nvidia by custom-making AI chips.

• For these reasons, both Broadcom and Nvidia deserve a place in one’s aggressive portfolio.

# 💰 Stocks to watch today?(22 Nov)

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.

Report

Comment1

  • Top
  • Latest
  • Great analysis! Broadcom's growth potential in AI is impressive. Exciting times ahead. [OK]
    Reply
    Report