Why Are Analysts Bullish on Broadcom?

Analysts’ recommendations for Broadcom

So far, we’ve seen that Broadcom (AVGO) is expecting its revenue to fall in the second fiscal quarter and be flat in fiscal Q3, which has made investors cautious about the stock. However, analysts are optimistic on the stock and believe the company may be seeking another acquisition target. Broadcom is known for growing through acquisitions rather than organically.

Why Are Analysts Bullish on Broadcom?

Of the 37 analysts covering Broadcom, 34 recommend “buy,” and three recommend “hold.” In contrast, analysts are divided over rivals Qualcomm (QCOM) and Texas Instruments (TXN), with almost 50% of analysts covering the stocks recommending “buy,” and 50% recommending “hold.” Let’s see what’s making analysts bullish on Broadcom.

Bullish analysts

According to MarketWatch , Evercore ISI analyst C.J. Muse initiated coverage of Broadcom and gave it a $300 price target because of the company’s market-leading position and growing profit margins. He stated that the company is a market leader in 20 semiconductor franchise businesses. Each business has wide profit margins and very little competition because of huge entry barriers.

This little competition and Broadcom’s market-leading position give it pricing power, and offering differentiated value to end-customers enables the company to charge higher prices for its products. These factors could continue to drive Broadcom’s profit margins despite weak orders from its largest wireless customer, Apple (AAPL). Muse added that Broadcom’s $12 billion buyback might act as a catalyst for the stock. Muse’s May 24 report sent Broadcom stock up ~4% in just two days. Continue reading to know what other analysts think about Broadcom stock.

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