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Shares of Broadcom (NASDAQ:AVGO) advanced over 5% on Monday as Citi resumed coverage on the stock with a Buy rating and a price target of $1,000, noting strength in the core business and accretion from the VMware acquisition.
The bank commented that Broadcom reported strong F4Q23 results driven by AI, “which is expected to double from $4.0 billion in F23 to more than $8.0B in F24”.
The semiconductor and software company earned an adjusted $11.06 per share on $9.3B in revenue in the fourth quarter, compared to expectations of $10.96 per share on $9.28B in revenue.
During the quarterly period, semiconductor solutions revenue came in at $7.33B, above the $7.27B estimate, up 3% year-over-year.
Citi analysts further expected sales from AI infrastructure to double from $4B in F23 (11% of F23 sales) to over $8B in F24 (17% in F24 sales).
Commenting on Broadcom’s recent $69B acquisition of VMware (VMW), Citi believed VMware could be $12.50 or 34% accretive to AVGO’s F25 EPS.
“We believe Broadcom should eventually achieve gross margins of 78% and operating margins of 58% for peak EPS of $60.00,” Citi analysts added.
Since the start of the year, AVGO has jumped about 70.61%, outpacing the S&P 500, which rose about 20.40% in the same period.
