Broadcom (AVGO) – Bullish Sentiment & Potential for Further Upside (CNBC investing Club Analysis)
This analysis from the CNBC Investing Club with jim Cramer presents a strongly bullish outlook on Broadcom (AVGO), despite a recent significant stock price increase. Here’s a breakdown of the key arguments:
Why the bullishness?
strong Backlog: Broadcom’s backlog exceeding $110 billion provides “significant business visibility” for the next two years, leading analysts (like Goldman Sachs) to materially raise FY26 and FY27 earnings estimates ($9.95 to $12.10 respectively).
Hock Tan’s Continued Leadership: CEO Hock Tan’s commitment to remain with the company through at least 2030 is a major positive.He’s credited with transforming Broadcom through strategic acquisitions and is seen as having a long-term vision.
Successful Acquisition strategy: Tan’s history of smart acquisitions, including the recent VMWare deal, has strengthened Broadcom’s position. Earnings revision Dynamic: The stock rally is supported by substantial earnings revisions, a pattern historically seen with Nvidia, suggesting further upside potential.
Valuation Justification: Despite a recent price surge, the stock is cheaper from a P/E perspective than it was the previous day. The forward-looking estimates,while potentially optimistic,are considered trustworthy given the supporting factors.
New AI Chip Customer: A major new customer for Broadcom’s custom AI chip design services is a significant growth driver.
Acknowledged Risks & Cramer’s Strategy:
Potential for Profit-Taking: The analysis acknowledges that investors may take profits after the recent gains. Cramer’s Charitable Trust’s plan to Trim: The Charitable trust intends to trim its position to maintain a 5% threshold, but this is framed as disciplined profit-taking, not a loss of conviction. This trimming also allows for potential re-entry during a pullback.
Pullback Chance: A potential pullback would present a buying opportunity, offering both a good price and* good value.
Overall Conclusion:
The analysis suggests that broadcom is a well-managed company with strong fundamentals and significant growth potential. While acknowledging the possibility of short-term profit-taking, the long-term outlook is overwhelmingly positive, with the potential for further earnings revisions and stock price thankfulness.
Disclaimer: This is a summary of the CNBC Investing Club analysis and does not constitute financial advice. The original source should be consulted for complete data and context.
