Broadcom: Selling Would Be A Mistake

Summary

• Broadcom's fundamentals remain resilient, but unexciting, with solid Q2 results and strong cash flow, yet revenue growth is slowing.
• Valuation appears stretched, as the P/S ratio is near multi-year highs, while revenue growth lags its three-year average, indicating potential overvaluation.
• The outlook for Q3 is decent, with modest acceleration in revenue growth, but that may not be enough to quell concerns about longer term growth deceleration.
• Given robust business quality, but limited upside at current prices, I reiterate my hold rating—selling would be a mistake, but risk/reward for buying is not compelling.

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The U.S. market's rebound from early April lows has been strong but Broadcom Inc.'s (NASDAQ:AVGO) rally has been absolutely staggering. After reaching a low of $138.10 on April 7th, the stock has surged over 90%, setting many all-time highs in

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.

Analyst's family has a beneficial long position in the shares of AVGO.