Broadcom is set to split its shares in a 10-for-1 offering, making ownership of its stock more accessible to investors and employees. Historically, shares have risen 25% following a stock split announcement, but Broadcom’s shares have only increased by about 8%. However, the company’s acquisition of VMware and its strong focus on artificial intelligence present other reasons to consider buying the stock. Broadcom’s networking revenue is expected to grow 40% this year due to AI-related demand, and its AI accelerator business is highly profitable.
On the flip side, Broadcom’s growth story heavily relies on the VMware deal, and some areas of its business, such as wireless and server storage connectivity, are facing challenges. The company’s reliance on a small number of customers, with Apple accounting for 17% of its revenue, presents a risk. Additionally, potential competition from Nvidia in Ethernet switching and custom AI accelerators could pose a threat to Broadcom.
Despite the enthusiasm for the stock split, it may not have a significant impact on the company’s underlying business. The stock trades at relatively high valuations, offering some caution to investors. However, if looking at Broadcom as a long-term investment, the timing of buying before or after the split may not matter much.
In conclusion, while the stock split may not be a major catalyst, patient investors could consider buying Broadcom for its long-term potential, especially considering its strong presence in AI technology. The company’s financial performance, coupled with the risks associated with its business model, should be carefully evaluated before making an investment decision.
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https://www.fool.com/investing/2024/07/01/should-you-buy-broadcom-stock-hand-over-fist-befor/