Rosenblatt raises price target on Broadcom stock to $2,400: Time to buy?

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On Thursday, Rosenblatt Securities raised its price target on Broadcom Inc. (NASDAQ: AVGO) to an impressive $2,400  from $1,650, while reiterating its “Buy” rating.

This bullish adjustment by Rosenblatt is driven by Broadcom’s strong performance and strategic positioning within the burgeoning AI sector, signaling potential growth that could interest any investor.

Why such confidence in Broadcom? The company’s ventures into AI-related infrastructure networking and the specialized sector of application-specific integrated circuits are paying off. These moves are bolstered by effective synergies in enterprise software, setting a strong foundation for sustained growth.

Hans Mosesmann from Rosenblatt noted that looking ahead to fiscal 2026, Broadcom could see high-teens sales growth and might generate $75 per share on an adjusted basis, figures that underscore the company’s robust financial health and innovative edge.

Stock split

Further stirring investor interest is the impending 10-for-1 stock split, set to take place post-market on July 12, 2024. This follows a trend seen across the tech industry, aiming to make shares more accessible to a broader base of investors.

Post-split, Broadcom’s stock structure will mirror the expanded accessibility seen in other tech giants like Nvidia, which executed a similar split just over a month prior.

Strategic collaboration

Broadcom is working closely with ByteDance to produce an advanced AI chip, navigating the tricky waters of international trade tensions. This partnership aims to secure a reliable chip supply and reduce costs, crucial in a time when tech companies globally are scrambling to fortify their hardware capabilities amidst geopolitical pressures.

The production of this 5-nanometer chip is set to be a significant step forward, representing a milestone in US-China tech collaboration under stringent export controls.

Financials and valuation

Broadcom’s recent financial performance further paints a picture of a company on the rise. Its fiscal second-quarter results were nothing short of stellar, leading to a record high in its stock price.

The company reported revenues of $12.49 billion, a 43.1% increase year-over-year, comfortably surpassing expectations. This financial upturn is supported by an adjusted EBITDA of $7,429 million, or 59 percent of revenue, highlighting efficient operations and strong profitability.

On the valuation front, despite the impressive growth metrics, Broadcom’s stock is still considered pricey by some analysts. The recent surge in price following the announcement of its stock split and favorable earnings has sparked debates about whether the stock is overvalued.

However, many see the elevated price as justified, given the company’s pivotal role in AI infrastructure, its diversified revenue streams, and continuous investment in R&D, which safeguard its competitive edge.

As we delved into Broadcom’s trajectory, it’s clear the company is not just riding the wave of tech innovation but is actively shaping its currents. With a solid strategy rooted in high-performance semiconductor development and smart partnerships, Broadcom stands at the forefront of the semiconductor industry.

With the fundamentals laid out, it’s now time to delve deeper into what the technical charts reveal, providing us with insights into Broadcom’s potential future movements in the stock market.

Bullish momentum will prevail above $156.4

Broadcom’s stock has seen an unprecedented upward move since late 2022, providing existing investors with over fourfold returns. It seemed the rally had ended earlier this year when the stock traded in a $1,200-$1,400 range between March and May.

AVGO chart by TradingView

However, following the release of the company’s recent quarterly results, the stock again resumed its upward move. So far, the stock hasn’t retraced significantly, which is a good indication for bulls.

Investors who are looking to buy the stock going into the split can do so considering it can move higher after the split. As long as the stock trades above its recent swing low at $1,564 ($156.4 post-split), the bullish momentum will remain.

Traders who are bearish on the stock must avoid shorting the stock going into the split. Fresh short positions should only be considered if, after the split, the stock shows signs of weakness and fails to cross above its recent swing high at $1,851.62 ($185.61 post-split).

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