Getting Ready for Broadcom's Best Day in History

Broadcom Inc. shares experienced a significant surge following an earnings report that received widespread acclaim. The stock initially soared by as much as 16.1% during Thursday’s session, nearing its all-time highest single-day performance of a 15.8% increase recorded on March 19, 2020. Broadcom shares (AVGO) eventually pulled back slightly, ending up 14.0%, which would mark its second-best day ever and result in a nearly $100 billion boost in market capitalization.

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The robust performance was driven by optimism around Broadcom's advancements in AI and software revenue. Ben Reitzes, an analyst at Melius Research, praised the company’s progress, noting that key customers are increasing their AI capital expenditures. Broadcom raised its AI revenue forecast for the fiscal year by over $1 billion, yet Reitzes believes this new target of more than $11 billion is still conservative.

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He anticipates further growth, forecasting $12 billion in AI revenue for fiscal 2024. Reitzes maintains a buy rating on the stock and has increased his two-year price target from $1,850 to $2,050.

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Mark Lipacis from Evercore ISI also views Broadcom’s forecast as conservative. He highlights that the company is onboarding two new custom AI silicon customers, which should provide strong mid-term visibility into AI-driven revenue streams.

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Lipacis also notes the traction Broadcom’s Ethernet solutions are gaining in AI data centers. Additionally, he commends the integration of VMware into Broadcom, suggesting the company is finding better revenue and cost synergies than initially expected. Consequently, Lipacis has raised his target price on Broadcom shares from $1,620 to $2,010 and rates the stock as outperform.

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Cantor Fitzgerald’s C.J. Muse is equally optimistic about Broadcom’s future. He emphasizes the company's potential for growth driven by AI, a recovery in non-AI semiconductor businesses, and accelerating VMware revenues. Muse also highlights Broadcom's plan to implement a 10-for-one stock split, which he believes will be well-received by investors. Post-split trading is set to commence on July 15. Muse has increased his target price for Broadcom shares from $1,600 to $1,875, maintaining an overweight rating.

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Jefferies analyst Blayne Curtis notes that AI was a standout in Broadcom's report despite challenges in other areas. He acknowledges that while the broadband business remains weak, there could be a modest rebound in server storage connectivity in the second half of the year. Curtis applauds Broadcom's ability to navigate a significant cyclical downturn across much of its business and foresees benefits from ongoing AI developments and a broader cyclical recovery. He has upgraded his target price for Broadcom from $1,550 to $2,050 and continues to rate the stock as a buy.

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In summary, Broadcom Inc. experienced a significant boost in stock value following a highly praised earnings report, driven by substantial gains in AI and software revenues. Analysts across the board remain optimistic about the company's future, with increased revenue forecasts and higher price targets reflecting confidence in Broadcom's strategic direction and market position. The planned 10-for-one stock split is also expected to be positively received, further supporting the stock’s upward momentum.

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