Broadcom (AVGO) is trading tightly in its newest base and near all-time highs. The company’s sales growth estimates call for another robust quarter.
The IBD Big Cap 20 stock is tied with Nvidia (NVDA) for the top spot out of 39 names in the Electronics-Semiconductor Fabless industry group. The group ranks No. 36 out of 197 industry groups.
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Broadcom Stock Climbs Back
The stock is in a choppy, irregular base resembling a double bottom with an official 185.16 buy point. But the stock looks to be forming a handle entry at 180.25.
Because it is a late-stage base following several base breakouts since May 2023, the stock has a lower chance of success. Shares have climbed around 52% so far this year and 262% since the May 2023 breakout. Broadcom stock had a 10-for-1 stock split on July 15.
The stock shot up in mid-June to a record high after the company’s fiscal second-quarter earnings report came out. But shares quickly reversed and began forming the current base.
The stock sank more than 10% in heavy volume despite the company’s beat on fiscal Q3 earnings and sales estimates on Sept. 5. Its current-quarter revenue guidance of around $14 billion came up short of analysts’ forecasts. Shares sliced through their 10-week moving average but rebounded with a vengeance the following week. Broadcom stock has been recovering.
Profit And Sales Growth Keep Improving
Its earnings climbed from 6% in the October Q3 quarter to 7%, 7% and 18% the following quarters. Even more impressive was its 47% sales growth, up from 4% just four quarters ago, according to MarketSurge.
“Broadcom’s third-quarter results reflect continued strength in our AI (artificial intelligence) semiconductor solutions and VMware,” said Hock Tan, president and CEO of Broadcom, in the earnings release. VMware is a cloud software company acquired nearly a year ago.
Profit estimates show 26% growth for the current quarter, then accelerating to 34% and 35% over the following two periods.
And FactSet estimates show 51% sales growth for its current quarter, before slipping to 23% and 18%.
Analysts recently raised their fiscal 2024 profit growth estimates to 14% and 28% for fiscal 2025. Its fiscal year ends this month.
The stock holds a 6 IBD Earnings Stability factor, showing stable profits over the last three to five years. In addition, Broadcom holds a best-possible 99 Composite Rating.
Broadcom has become one of the world’s most important chip companies. Its products include chips designed specifically for artificial intelligence computations. Its major customers include Apple (AAPL) and IBM (IBM).
Mutual funds have scooped up increasing amounts of AVGO shares, with 5,437 owning the stock in September, up from 5,067 in June.
Two high-performing IBD Mutual Fund Index components added the stock in the most recent quarter. JPMorgan Large Cap Growth Fund (SEEGX) increased its position to nearly 21 million shares, while Fidelity Contrafund (FCNTX) upped its exposure to 5.27 million shares. Another sign of institutional backing is its Accumulation/Distribution Rating of B+.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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