Broadcom is the IBD Stock Of The Day as the fabless chipmaker and infrastructure software provider prepares to report its fiscal second-quarter results on June 5.
Analysts see potential upside for the Palo Alto, Calif.-based company with its upcoming earnings report.
Analyst estimates compiled by FactSet predict that Broadcom will earn an adjusted $1.57 a share on sales of $14.96 billion in the quarter ended May 4. That would translate to year-over-year growth of 43% in earnings and 20% in sales.
Mizuho Securities analyst Vijay Rakesh on Friday reiterated his outperform rating on Broadcom stock with a price target of 250.
On the stock market today, Broadcom stock gained nearly 1% to close at 230.63.
Broadcom stock has been in a consolidation period for 22 weeks with a buy point of 251.88, according to IBD MarketSurge charts. However, with its recent pullback it could be forming a handle, which would offer a lower buy point of 235.28. That handle would be valid after Tuesday.
Broadcom is the market-share leader in application-specific integrated circuits, or ASICs, for artificial intelligence applications in data centers, Rakesh said. He estimates that Broadcom had 70%-80% share of the server ASIC market in 2024.
Broadcom should benefit from ramping up production of custom artificial intelligence chips for Facebook parent Meta Platforms and Alphabet unit Google, he said. Next year, it is expected to generate sales from server AI chips for OpenAI and Apple, Rakesh said.
Broadcom Stock Is On Three IBD Lists
Further, analysts believe Broadcom should benefit from AI data center buildouts announced last week in Saudi Arabia and the United Arab Emirates.
In addition to ASICs, Broadcom makes networking and wireless connectivity products and owns virtualization software firm VMware.
Broadcom stock ranks first out of 39 stocks in IBD's fabless semiconductor industry group, according to IBD Stock Checkup. It has a best-possible IBD Composite Rating of 99.
Broadcom stock is on three IBD lists: Leaderboard, Big Cap 20 and Tech Leaders.
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