Broadcom: Can Growth Keep Up With Valuation?

Oct. 16, 2024 11:45 PM ETBroadcom Inc. (AVGO) Stock, AVGO:CA Stock
Bashar Issa profile picture
Bashar Issa
5.63K Followers
(8min)

Summary

  • Broadcom excels in cutting-edge connectivity chips but shows limited growth, making its 37x forward PE ratio seem high for its performance.
  • The VMWare acquisition boosted AVGO's revenue, but core business growth remains mediocre, with only a 4% increase in FQ3 2024.
  • Selling the unprofitable EUC segment will enhance profitability, potentially doubling net income, and improving gross margins after initial acquisition-related dips.
  • Despite positive AI and data center tailwinds, Broadcom's valuation is high, and future EPS growth is partly debt-financed, justifying a 'Hold' rating.
Broadcom

G0d4ather

Investment Thesis

I think Broadcom (NASDAQ:AVGO) is a great company. They sell the chips that go in connectivity devices such as routers, Wi-Fi hubs, and data center switches. They focus on the most cutting-edge technologies, commanding premium prices that are mirrored in their astronomical

This article was written by

Bashar Issa profile picture
5.63K Followers
Bashar is a contributing writer at Seeking Alpha, focusing on Long/Short investment ideas, with a geographic focus in North America. Before that, Bashar worked at an Investment Fund in the United Kingdom. He has a Master's degree in Finance from the Queen Mary University of London and a Bachelor's degree in Economics from Middlesex University.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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