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Bank of America Analyst Recommends Broadcom as Best-in-Class Buying Opportunity for AI-driven Earnings Power
Bank of America’s analyst, Vivek Arya, has reiterated a buy rating on Broadcom, stating that it remains a best-in-class buying opportunity as artificial intelligence (AI) drives earnings power. Arya’s comments came after Broadcom CEO Hock Tan delivered a keynote address at Bank of America’s Global Technology Conference that featured the focus on premium compute/networking products.
Focus on Premium Compute and Networking Products
In his note, Arya highlighted the company’s vision of focusing on premium compute and networking products. The analyst pointed out that the company has been laser-focused on operational efficiency. He also noted that the company has experienced consistent gross margin (GM) expansion, and it generates best-in-class free cash flow (FCF) generation and returns. The FCF margins of 50% are the highest in the semiconductor industry, according to the analyst.
Supercharged Growth from AI Market
Broadcom has surged 41% this year, and Arya’s $950 price objective represents a further 20% upside from Tuesday’s close of $790. As the AI market rapidly expands, its growth will be supercharged. According to Arya, the AI market is still in its early stages, and he thinks that Broadcom can benefit not only from its semiconductors business but also from its AI Ethernet networking platform.
While much attention is placed on accelerator penetration in AI servers, an underappreciated opportunity is the networking assets that need to support higher bandwidth requirements generated by AI workloads, which could be more influential to AVGO’s AI growth long-term, he wrote in his note.
The analyst is optimistic that AI can help Broadcom drive roughly $47/$50+ in EPS by Fiscal Year (FY) 24/25E, and he sees 5%-6% upside to long-term numbers if the AI revenue targets are achieved.
Conclusion
Broadcom is well-positioned to take advantage of the AI market, which is still in its early stages of growth. The company’s focus on premium compute/networking products, operational efficiency, consistent GM expansion, and best-in-class FCF generation/returns has impressed Bank of America analyst Vivek Arya. He thinks that Broadcom is a best-in-class buying opportunity and recommends a buy rating on the stock.
FAQs
What is Broadcom?
Broadcom is a semiconductor and infrastructure software company that provides solutions for data center, networking, storage, and wireless communications.
What is Bank of America’s Analyst Rating on Broadcom?
Bank of America’s analyst, Vivek Arya, has reiterated a buy rating on Broadcom and stated that it remains a best-in-class buying opportunity as artificial intelligence drives earnings power.
What is Broadcom’s Focus?
Broadcom has been focused on premium compute and networking products, operational efficiency, consistent GM expansion, and best-in-class FCF generation/returns.
What is AI Ethernet Networking Platform?
An AI Ethernet networking platform is a network infrastructure that uses artificial intelligence technologies to help optimize network performance, enhance security, and enable better management and control of the network.
How Much Can AI help Broadcom Drive in Terms of EPS?
Bank of America’s analyst, Vivek Arya, is optimistic that AI can help Broadcom drive roughly $47/$50+ in EPS by Fiscal Year (FY) 24/25E.
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