AVGO is a strong buy at ~$200/share

Sandra Nehemiah

$Broadcom(AVGO)$ Broadcom is up 25% in the last month.📈

Despite the recent market sell-off, I believe

AVGO is a strong buy at ~$200/share.

Here is why:

1) AI Growth and Leadership:

-Broadcom AI revenue surged from $3.8B (FY23) to $12.2B (FY24), driven by custom AI accelerators and networking

-Addressable market for AI semiconductors expects to hit $90B in FY27

2) Ecosystem Investment:

-Hyperscale customers have increased their capex to $202B in 2024 (from $145B in 2023), aligning with Broadcom's strategic investments

3) VMware Acquisition:

-VMware added $21.5 billion to revenue in FY24

-Infrastructure software revenue has grown 181% yoy, showcasing robust integration.

However, there are hidden risks AVGO must address moving forward:

-AI revenue is heavily reliant on a few hyperscaler customers

-Non-AI semiconductor revenue down 23% yoy(Q4)

-Broadband revenue fell 51% yoy in Q4, with recovery expected only in 2025

With the stronger-than-expected job report, some concerns over the discount rate are raised, which will adversely affect the market valuation in the short-term.

Therefore, I believe a fair valuation for AVGO is around $200/share.

Thoughts?🤔

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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Here is why: 1) AI Growth and Leadership: -Broadcom AI revenue surged from $3.8B (FY23) to $12.2B (FY24), driven by custom AI accelerators and networking -Addressable market for AI semiconductors expects to hit $90B in FY27 2) Ecosystem Investment: -Hyperscale customers have increased their capex to $202B in 2024 (from $145B in 2023), aligning with Broadcom's strategic investments 3) VMware Acquisition: -VMware added $21.5 billion to revenue in FY24 -Infrastructure software revenue has grown 181% yoy, showcasing robust integration. However, there are hidden risks AVGO must address moving forward: -AI revenue is heavily reliant on a few hyperscaler customers -Non-AI semiconductor revenue down 23% yoy(Q4) -Broadband revenue fell 51% yoy in Q4, with recovery expected only in 2025 With the stronger-than-expected job report, some concerns over the discount rate are raised, which will adversely affect the market valuation in the short-term. 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