Broadcom (AVGO) stock is sinking Friday after the chipmaker beat top- and bottom-line expectations for its fiscal third quarter but issued an outlook for the fourth quarter that came up short of expectations.
In the quarter ended August 4, Broadcom's revenue increased 47.3% year-over-year to $13.1 billion, thanks in part to a nearly tripling in revenue for its infrastructure software segment to $5.8 billion. The company said earnings per share (EPS) were up 18.1% from the year-ago period to $1.24.
"Broadcom's third-quarter results reflect continued strength in our artificial intelligence (AI) semiconductor solutions and VMware," said Broadcom CEO Hock Tan in a statement. "We expect revenue from AI to be $12 billion for fiscal year 2024 driven by Ethernet networking and custom accelerators for AI data centers."
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The results came in ahead of analysts' expectations. Wall Street was anticipating revenue of $13 billion and earnings of $1.20 per share, according to CNBC.
However, sentiment turned negative toward the semiconductor stock after Broadcom provided its outlook on the fourth quarter. The company anticipates revenue of approximately $14 billion, which was just short of Wall Street's forecast for $14.04 billion. Still, the company's $14 billion forecast represents an increase of about 51% from the year-ago period.
Is Broadcom stock a buy, sell or hold?
Heading into Friday's session, Broadcom was up nearly 38% for the year to date. Unsurprisingly, Wall Street is very bullish on AVGO.
According to S&P Global Market Intelligence, the consensus analyst target price for the tech stock is $192.71, representing implied upside of 40% to current levels. Additionally, the consensus recommendation is Strong Buy.
Financial services firm Oppenheimer is one of the more bullish outfits on AVGO stock with an Outperform rating (equivalent to a Buy) and $200 price target.
"We believe AVGO has one of the most strategically and financially attractive business models in semiconductors," says Oppenheimer analyst Rick Schafer, citing its strong competitive edge in the high-end filter market, its diversified and "sticky" non-mobile business, its manufacturing advantage and its strong earnings and cash flow growth.
Schafer adds that Broadcom remains a top AI play after Nvidia (NVDA) as its data center AI networking and custom compute portfolio support "snowballing AI growth."
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