To The Moon

On Thu, 06 Mar 2025, $Broadcom(AVGO)$ reported its quarterly earnings.

Compared to LSEG consensus estimates:

• Earnings per share : came in at $1.60 adjusted vs $1.49 expected.

• Revenue : was $14.92 billion vs $14.61 billion expected vs $11.96, a year ago.

• Net income : came in at $5.5 billion, that was a +413.53% YoY gain.

Outlook / Guidance for current quarter.

• The chipmaker offered strong guidance for current quarter, that was music to traders’ ears.

• For Q2 2025, AVGO’s guidance was $14.9 billion vs $14.76 billion forecast by Wall Street analysts.

No wonder after the earnings were reported, the tech company rose by an impressive +9%, post trading hours.

Broadcom presents a compelling narrative:

• This is because the stock has soared +50% YoY.

• It has maintained robust revenue growth averaging 24% over 3 years,

However, AVGO is not without its peculiarity:

• During a downturn, AVGO can lose and there is evidence, from as recent as in 2022.

• That year, AVGO lost as much as -36% of its value over a span of a few quarters.

Why This Matters

While Broadcom's AI prospects remain promising, substantial macroeconomic headwinds warrant attention.

Although inflation concerns have diminished, they have not disappeared.

The Trump administration's aggressive tariff and immigration policies are rekindling inflation anxieties, potentially signaling economic turbulence ahead

Risk Factors.

Heightened geopolitical uncertainty stemming from Trump administration's bold policy initiatives presents additional challenges.

With ongoing conflicts in Ukraine-Russia, trade uncertainties, and strained negotiations with long-standing allies including Canada, Mexico, and Europe, the risk landscape has grown increasingly complex.

Come April 2025, when US trade tariffs implementation is enlarged to the rest of the world, the compounding effect may proved to be even more fatal, on a global scale.

Performance Metrics

Another factor for investors to note is - during the recent market downturns, AVGO stock has underperformed the benchmark S&P 500 index. (see above)

This is a critical consideration for investors evaluating their risk tolerance in today’s volatile environment.

While investors have their fingers crossed for a soft landing by the US economy, how bad can things get in the event of another recession?

To understand AVGO's resilience is to consider the US's two most recent crises, which offer some clues.

Year 2022 - Inflation Shock.

• AVGO stock fell -36.3% from a high of $67.09 (4 Jan 2022) to $42.71 (6 Oct 2022).

• This versus a peak-to-trough decline of -25.4% for the S&P 500.

• AVGP fully recovered to its pre-crisis peak by 18 May 2023 though.

• Since then, AVGO has increased to a high of $250.00 on 16 Dec 2024 and currently trades at $194.23 (as of 12 Mar 2025).

Year 2020 - Covid Pandemic.

• AVGO stock fell -46.8% from a high of $31.57 (19 Feb 2020) to $16.79 (18 Mar 2020).

• Versus a peak-to-trough decline of -33.9% for the S&P 500.

• It fully recovered to its pre-Crisis peak by 5 Jun 2020.

Hold or Sell ?

In conclusion, while AVGO stock currently enjoys investor enthusiasm driven by significant AI sector expansion, it commands a premium valuation at 30x forward earnings.

Consider that despite Broadcom’s impressive +44% revenue surge in 2024, projections indicate a decelerating growth trajectory of +21% in 2025, followed by +15% in 2026.

Parting question, would you hold on to your AVGO stock or panic and sell if AVGO starts dropping to $150, $100, or even lower ?

While investors have their fingers crossed for a soft landing by the US economy, how bad can things get if there is another recession?

My viewpoints: (mine only)

When reading the post from Forbes, sometimes I get irritated by the “sales” push via fear mongering infused into the post

It is safe to assume that retail investors (like us) is fully aware that individual stocks are more volatile than a robo-portfolio funds. If not, we have no business investing on Wall Street.

There was no evidence in the post indicating that AVGO’s fall during a downtime is the worst of the lot ?

What I have done is to do a straight forward comparison of AVGO’s stock performance against its peers - $Qualcomm(QCOM)$, $NVIDIA(NVDA)$, $Marvell Technology(MRVL)$ and $Texas Instruments(TXN)$.

The outcome speaks for itself. (see below)

In terms of performance (stock price movement) :

• Texas instruments : -6.732%.

• Broadcom : -10.13%.

• Nvidia : -27.70%.

• Qualcomm : -29.48%.

• Marvel : -49.08%.

Broadcom was not the worst performer of the lot, neither was it the best. It came in #2 as the stock that fell the least in its stock price.

Now that AVGO is going after a slice of NVDA’s AI hyperscale centres’ pie, perhaps comparison of the two well-run companies would be most appropriate.

Simply put, the Forbes post has confirmed AVGO is a good investment because the stock (price) always managed to bounce back stronger based on the two cited crises.

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• Do you think AVGO is a worthy investment as argued by Forbes?

• Do you think AVGO is a better investment than NVDA, now that they are competing in the same hyperscale space ?

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