Broadcom's Post-Q2 Earnings Pullback Is A Classic Overreaction

(8min)

Summary

  • Broadcom's stock is trading down post-earnings on in-line results, which is understandable considering the 55% rally since the start of the quarter and the RSI being in or near overbought territory since May 9th.
  • We've been waiting for a window like this at Broadcom because we think it's building up to be the industry go-to in ASIC and is uniquely positioned in AI networking.
  • ASIC is a lower-margin business, but Broadcom's margins, unlike Marvell's, are expanding, not contracting, because it has other legs to offset.
  • We're upgrading Broadcom to a strong buy and recommend investors look past the market's reaction to this print.
  • Looking for a portfolio of ideas like this one? Members of Tech Contrarians get exclusive access to our subscriber-only portfolios. Learn More »

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Broadcom (NASDAQ:AVGO) reported 2QFY25; sales grew 20% Y/Y to $15B, more or less in line with estimates of $14.97B, and guidance for 5% sequential growth next quarter to $15.8B in sales was once again in line with estimates. In line is basically a miss

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This article was written by

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Tech Stock Pros is a team of three former technology sector engineers with a long history of investing in the tech sector.

They run Tech Contrarians, an investing group providing institutional-level company research to individual investors. Utilizing a live portfolio with quarterly updates, bi-weekly newsletters, and answering questions daily via chat, Tech Stock Pros aims to demystify investing in the technology sector. Learn more.

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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