Broadcom has had an impressive 60% increase in share price in 2024, with a 10-for-1 stock split announced for July. CEO Hock Tan has built the company through strategic acquisitions, focusing on both chip design and enterprise software. The company’s performance in acquiring chip technologies and managing profitability has positioned it well to benefit from the AI infrastructure boom.
In its most recent quarter, Broadcom reported 6% year-over-year growth in semiconductor sales, particularly in AI-specific chips which saw a 280% increase. The acquisition of VMware has also added to the software segment, accounting for 40% of total revenue. The company is working on integrating VMware and improving profitability, aiming for free cash flow margins to reach 50%.
Despite the company’s success and reasonable free cash flow multiple, a large debt load from the VMware acquisition remains a concern. Total debt stands at $74 billion, but management plans to pay it down gradually. Shareholders remain optimistic about Broadcom’s future, with a focus on VMware’s progress and debt repayment throughout 2024.
Investors should consider all factors, including the stock split, acquisitions, and debt load, before investing in Broadcom. The Stock Advisor analyst team has identified the top 10 stocks for investors to consider, which could bring significant returns in the future. Past performance, such as the success of stocks like Nvidia, can provide insight into potential gains. As always, it is important to conduct thorough research and consider all aspects of an investment opportunity before making a decision.
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