Broadcom (Nasdaq: AVGO) has been on an incredible run to close out the year, rising about 42% in December alone.The stock got another jolt on Monday, increasing about 6% after a major Wall Street analyst gave the AI chipmaker a sizable price target upgrade.With the December surge, Broadcom stock is up about 107% year-to-date, trading at around $233 per share. It started the month of December trading at around $163 per share.
Broadcom gets key analyst upgrade
Monday’s move for Broadcom stemmed from a significant price target upgrade by analysts at UBS. UBS analyst Timothy Arcuri of UBS boosted his target for Broadcom by $50 per share to $270 a share. That would be a 16% increase from the current price.“After reviewing Broadcom’s serviceable-addressable-market disclosures and reassessing likely outcomes for its custom compute and AI-networking businesses, we are raising our AI revenue estimates,” Arcuri wrote in a research note Monday, reported The Street.UBS raised its revenue estimates for Broadcom by 20% for fiscal 2026 and 40% for fiscal 2027.This comes after the AI chipmaker raised its own long-term projections. On the fourth quarter earnings call two weeks ago, Broadcom CEO Hock Tan cited the “massive” opportunity he sees for Broadcom for its AI chips over the next three years.Tan said the firm is looking at the potential for $60 billion to $90 billion in revenue from its AI chips alone in 2027. That would be some six times more than the $12.2 billion the company made from AI chips in fiscal 2024.This rough estimate, which Tan said isn’t guidance, is based on revenue from contracts with its three major hyperscaler clients. It does not take into account potential revenue from two more hyperscaler Broadcom recently signed on with, or others that emerge in the future. One of the new clients has been widely reported to be Apple.“Even with these higher estimates, we still see room for upside given our middle-of-the-road market-share assumptions and the strong likelihood of significant SAM expansion if/when Broadcom adds two additional hyperscalers to its AI customer base,” Arcuri wrote in the Monday research note, reported The Street.
More price target increases
UBS is just the latest in a slew of price target upgrades for Broadcom. Last week, Morgan Stanley raised it by $32 per share to $265 per share, while Truist increased it by $15 to $260 per share.The December price surge had mostly to do with its long-term projections, but Broadcom also had a strong fourth quarter, with revenue up 51% and earnings rising 22% year over year.As a result of the strong runup in price, Broadcom recently became the 10th company to surpass $1 trillion in market cap.Broadcom’s P/E has skyrocketed to over 171, but based on its high forward earnings potential, its forward P/E is a more reasonable 34.Broadcom provides AI chips that power mobile and broadband networks, which is different from NVIDIA, whose chips mostly power data centers. Both of these AI stocks have tremendous long-term potential, but they are both trading at high multiples right now. NVIDIA is actually cheaper with a P/E of 53 as the stock price has come back a bit during a negative month for the stock.More By This Author:The Top 5 Mid Cap Stocks Of 2024
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