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Bank of America said Broadcom could be the next stock to reach a $1 trillion market cap.
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The chip maker's stock is rising after its quarterly profits exceeded estimates.
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Bank of America said strong sales, debt paydowns and profitable acquisitions should maintain the company's momentum.
Chip maker Broadcom It appears to be a contender to be the next member of the trillion-dollar stock market club, Bank of America said Thursday.
Investors cheered the semiconductor maker in Thursday trading after it reported earnings that beat estimates and announced a 10-to-1 stock split. Shares rose to an all-time high of $1,696 at about 11 a.m. ET.
Bank of America believes Broadcom has greater potential even after its big quarterly report. In a note published Thursday, analysts upgraded their price target for the company to $2,000, suggesting an upside of roughly 18% from current levels.
“We repeat buy, and consider it a top pick for AI (with NVDA) as AVGO appears to be uniquely positioned for growth in: 1) dedicated AI chips (complementing NVDA's merchant accelerators), 2) Ethernet networks (leveraging exponentially growing AI stacks) , and 3) Increase VMware sales (enables the enterprise to deploy AI within the company).”
Broadcom is among a group of semiconductor makers that have been buoyed by the artificial intelligence craze, with its chips being used to run basic software. It added that $3.1 billion in sales during the second quarter of the fiscal year were related to artificial intelligence products.
Strong sales forecasts also helped Broadcom rise on Thursday, as it forecast sales of $51 billion this fiscal year, slightly above expectations.
Bank of America sees this momentum continuing. For fiscal year 2025, it raised its sales forecast to $59.9 billion, or a 16% increase year over year. The upside drivers will be semiconductor sales and Broadcom's VMWare, a software company it acquired last year.
“Second, we note that paying down AVGO's debt ($8B+ annually) could create more room for more M&A in the coming year. Third, double-digit free cash flow growth in FY24 could boost dividends by Another 10% at the end of the fiscal year,” the analysts wrote. .
If Bank of America's price target is achieved, that would place Broadcom among an exclusive group of stocks with a trillion-dollar market cap. The newest member of the club is Nvidia, the leading semiconductor company that has soared to sky-high valuations, thanks to its central role in the AI wave.
Nvidia has been on the rise in recent months, joining Microsoft and Apple in $3 trillion mark.
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