What Could Rocket Broadcom Stock to New Heights
Broadcom (AVGO) has demonstrated remarkable surges, with over 30% rallies in under two months occurring 16 times, including notable bursts in 2010 and 2024. Additionally, it has experienced more than 50% gains in brief periods, highlighting its potential for rapid appreciation. If similar conditions arise, Broadcom could again see swift, substantial advances that offer significant opportunities for investors.
Specifically, we see these catalysts:
- AI Custom Silicon Hyper-Scaling
- VMware Margin Inflection and Revenue Acceleration
- Unlocking Accelerated Capital Returns
Catalyst 1: AI Custom Silicon Hyper-Scaling
- Details: Doubling AI revenue to over $40B in FY2026, Propelling total revenue growth to 50% YoY
- Segment Affected: Semiconductor Solutions
- Potential Timeline: Mid-2026
- Evidence: AI backlog rocketing to $73 billion, Securing new multi-billion dollar XPU orders from hyperscalers like Google, Anthropic, and OpenAI
Catalyst 2: VMware Margin Inflection and Revenue Acceleration
- Details: Expanding software gross margins toward 90%, Driving Infrastructure Software revenue above $30B
- Segment Affected: Infrastructure Software
- Potential Timeline: Throughout 2026
- Evidence: Accelerating VMware Cloud Foundation (VCF) adoption by top customers, Achieving significant cost synergies post-acquisition, boosting operating margins
Catalyst 3: Unlocking Accelerated Capital Returns
- Details: Accelerating dividend growth beyond 10% annually, Initiating substantial new share repurchase program
- Segment Affected: Corporate/Capital Allocation
- Potential Timeline: Next Earnings Call
- Evidence: Projected free cash flow soaring towards $107 billion by 2029, Recent 10% dividend increase signaling confidence in future cash flow
But The Stock Is Not Without Its Risks
Here are specific risks we see:
- VMware Customer Revolt & Channel Destruction
- Geopolitical Shock: China’s State-Sanctioned VMware Ban
- AI Growth Poison Pill: Margin Compression
Looking at historical drawdown during market crises is another lens to look at risk.
AVGO fell 27% in 2018, nearly 48% during Covid, and 35% in the inflation shock. Even with strong fundamentals, big swings still happen. Risk stays real.
Read AVGO Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
Reference: Current Fundamentals
- Revenue Growth: 23.9% LTM and 25.2% last 3-year average.
- Cash Generation: Nearly 42.1% free cash flow margin and 40.8% operating margin LTM.
- Valuation: Broadcom stock trades at a P/E multiple of 68.3
| AVGO | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Semiconductors | – |
| PE Ratio | 68.3 | 24.9 |
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| LTM* Revenue Growth | 23.9% | 6.5% |
| 3Y Average Annual Revenue Growth | 25.2% | 5.5% |
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| LTM* Operating Margin | 40.8% | 18.8% |
| 3Y Average Operating Margin | 38.6% | 18.3% |
| LTM* Free Cash Flow Margin | 42.1% | 14.0% |
*LTM: Last Twelve Months | If you want more details, read Buy or Sell AVGO Stock.
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