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."
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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."
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