Broadcom (AVGO) is the best S&P 500 stock Friday, surging more than 20% out of the gate, after the chipmaker beat earnings expectations for its fiscal 2024 fourth quarter and issued a better-than-expected revenue outlook for its fiscal 2025 first quarter.
In the three months ending November 3, Broadcom's revenue increased 51.2% year over year to $14.05 billion, boosted by 220% growth in artificial intelligence (AI) revenue. Its earnings per share (EPS) rose 27.9% from the year-ago period to $1.42.
"Broadcom's fiscal year 2024 revenue grew 44% year over year to a record $51.6 billion, as infrastructure software revenue grew to $21.5 billion, on the successful integration of VMware," said CEO Hock Tan in a statement. "Semiconductor revenue was a record $30.1 billion driven by AI revenue of $12.2 billion. AI revenue, which grew 220 percent year on year, was driven by our leading AI XPUs and Ethernet networking portfolio."
The results were mixed compared with analysts' expectations. Wall Street was anticipating revenue of $14.1 billion and earnings of $1.38 per share, according to CNBC.
For the first quarter of fiscal 2025, Broadcom expects to achieve revenue of approximately $14.6 billion, just ahead of analysts' expectations for $14.57 billion in sales.
The company also hiked its quarterly dividend by 11% to 59 cents per share. Broadcom is one of the best dividend stocks for dependable dividend growth, having increased its annual payout for 14 years straight.
Is Broadcom stock a buy, sell or hold?
Broadcom has been a standout in 2024, up 64% on a total return basis (price change plus dividends) for the year to date through the December 12 close. Unsurprisingly, Wall Street is very bullish on the semiconductor stock.
According to S&P Global Market Intelligence, the consensus recommendation among analysts it tracks is a Strong Buy.
However, analysts' price targets have failed to keep up with the stock's sizzling run. Indeed, the average price target of $213.05 represents a discount to current levels. This could prompt price-target hikes in the wake of Broadcom's well-received earnings report.
Financial services firm Truist Securities is one of those that hiked its target price on the tech stock after earnings, to $245 from $205, while maintaining its Buy rating.
"We expect AVGO's diversified semiconductor and software franchises to deliver strong sales growth through a cycle, potentially faster with its newfound AI exposure," says Truist Securities analyst William Stein. "Combining this with margin expansion and capital allocation (stock buybacks and acquisitions) should drive double-digit growth in free cash flow and dividends per share."
