Broadcom’s stock prices have reached record levels due to strong revenue growth in the second quarter of fiscal 2024, with a significant increase in AI-related revenue. The company’s revenue rose 43% year over year to $12.5 billion, with AI revenue increasing by 280% to $3.1 billion. However, there were declines in server storage and broadband revenue, which management expects to improve in subsequent quarters. Infrastructure software revenue also saw a significant increase, driven by VMware’s contribution.
Adjusted earnings per share and EBITDA also increased, and the company generated substantial cash flow in the quarter. Looking ahead, Broadcom anticipates full-year revenue of approximately $51 billion, with AI-related revenue expected to reach $11 billion. The company also announced a 10-for-1 stock split and a quarterly dividend.
While Broadcom’s AI-related growth is strong, its overall business faces challenges, with some segments experiencing declines. The stock is trading at a high forward P/E ratio, indicating that it may be overvalued. Compared to other companies like NVIDIA, which has been growing faster and is debt-free, Broadcom may not be the best investment option at this time.
In conclusion, while Broadcom is well-positioned in the AI space, the stock appears expensive given the current growth rate and debt load. It may be too late to buy shares at this point, and investors may want to consider other options, such as NVIDIA, in the semiconductor sector.
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https://www.fool.com/investing/2024/06/21/broadcom-record-high-revenue-stock-split-buy/