Broadcom's Targeted Upside Just Keeps Getting Better

Key Points

• Broadcom shares have been on a bullish run, up 350% in two years, and recently hit new all-time highs.
• The stock is positioned to benefit from AI and enterprise demand, with revenue expected to grow even further.
• Recent earnings smashed expectations, and analysts are calling for continued upside.

Broadcom Inc NASDAQ: AVGO has been one of the standout performers in the semiconductor space over the last two years, rising by 350%. The tech titan recently hit an all-time high, underscoring its impressive momentum as we head into the final few weeks of the year. 

So, what does that say about where the stock is trading today? From what we can see, investors should definitely be getting excited. As seen with the benchmark S&P 500 index, the broader market has been notching fresh highs while the Fed has started cutting interest rates, creating a bullish backdrop for tech stocks like Broadcom. In addition, the company's strong earnings and increased AI revenue guidance suggest more upside is on the cards. Let's jump in and take a closer look. 

Bullish Outlook for Broadcom as Analysts Expect Continued Growth

Broadcom's leadership in the semiconductor sector, especially in AI, is a major driver of its recent rally. During a recent interview, CEO Hock Tan explained why the company increased its AI revenue guidance, highlighting demand from mega-cap tech companies.  "We are in a segment of the AI market where we address several hyperscalers," Tan said, "and these hyperscalers have strong incentives to keep building large language models that become smarter and smarter." Broadcom's position within this space is critical to its future success, especially as AI adoption accelerates.

The company's fundamental performance also underscores its bullish potential. In its most recent earnings report, Broadcom smashed analyst expectations while delivering 47% year-over-year revenue growth. For those of us on the sidelines, it's worth noting that the next earnings report is due in early December. Looking ahead to that as a major catalyst, there's every reason for the stock to keep trending northwards in anticipation of a similar beat. 

Strong Potential for Market Share Gains With Broadcom’s Product Portfolio

While AI is a key growth area, Broadcom's success isn't limited to it. The company is also benefiting from broader semiconductor demand, particularly in 5G and networking. As more enterprises invest in these technologies, Broadcom's product portfolio positions it to gain additional market share. Its partnerships with major enterprises ensure a steady stream of revenue, which is set to remain robust as AI and cloud infrastructure spending rises.

This was one of the reasons that the team at Mizuho reiterated their Outperform rating on the stock this week, as did the Truist Financial and Cantor Fitzgerald teams. All gave the stock a price target ranging from $205-$225, which, considering Broadcom shares were trading around $175 during Wednesday's session, points to a targeted upside of nearly 30%.

Getting Involved With Broadcom Before Year-End Could Pay Off

Technically, there's a lot to like about the stock too. Broadcom's relative strength index (RSI) is currently 53, signaling the stock is in a neutral zone and far from overbought. The RSI is a momentum indicator ranging from 0 to 100, with readings above 70 indicating overbought conditions. A reading of 53 suggests the stock is trading in a healthy range and that there's a ton of room for gains before anyone could call it frothy. 

As we head into the last couple of weeks of the year, the case for Broadcom continues to strengthen. The company's resilience in the face of market volatility, combined with the Fed's recent rate cuts, creates a favorable environment for growth.

The "risk-on" sentiment in the market benefits high-growth stocks like Broadcom, and analysts are raising their price targets accordingly. An enviable combination of strong fundamentals, leadership in AI, and bullish market conditions all point to more gains ahead, and investors should, at the very least, have Broadcom high on their Q4 watchlist.