On Friday, CFRA, a notable financial research firm, upgraded the price target for Broadcom Limited (NASDAQ: NASDAQ:AVGO) shares to $1,600 from the previous $1,500. The firm maintains a Buy rating on the stock. The adjustment follows Broadcom's reported earnings per share (EPS) of $10.99 for the January quarter, surpassing the consensus estimate of $10.42.
Broadcom's recent financial performance showcased a significant 34% increase in sales, with an 11% rise excluding the impact of the VMware (NYSE:VMW) acquisition. The company's Infrastructure Software segment witnessed a substantial 153% growth, while Semiconductor Solutions saw a modest 4% increase.
Software bookings notably tripled sequentially to $1.8 billion, with the company projecting this figure to reach $3 billion in the April quarter, buoyed by the successful upgrade of customers to its premium VMware Cloud Foundation offering.
CFRA's analyst cited the company's accelerating growth and expanding exposure to software and artificial intelligence (AI) revenue as key factors for the raised price target. The analyst's expectations for Broadcom's EPS remain steady at $49.16 for the fiscal year 2024 (ending in October) and $56.90 for the fiscal year 2025.
Broadcom's AI semiconductor momentum is particularly strong, having quadrupled year-over-year, propelled by its Ethernet and custom silicon businesses, which are expected to combine for $10 billion in the fiscal year 2024, with a 70-30 split between the two.
Despite providing guidance for the fiscal year 2024 that aligned with market expectations, CFRA highlighted the higher quality of AI revenue, which is anticipated to exceed 35% of the fiscal year 2024 semiconductor sales, up from the previous estimate of 25%.
The firm also expressed a positive outlook on Broadcom's potential for margin and free cash flow (FCF) expansion, as well as its focus on debt reduction.
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