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Broadcom (AVGO) shares are lifting off Thursday morning after reporting more-than-promising fiscal second-quarter earnings results, revenue of $12.49 billion ($12.06 billion expected) and adjusted earnings of $10.96 per share ($10.80 per share expected). The chip designer also announced a 10-for-1 stock split, which will begin trading publicly at its adjusted price starting Monday, July 15.
Bernstein Managing Director and Senior Analyst Stacy Rasgon has raised his price target on Broadcom to $1,950 per share while maintaining an Outperform rating on the chip company. He tells The Morning Brief that Broadcom has "the second best AI story in the space" — second to Nvidia (NVDA) — while finding its core business to be "cyclically weak" as it transitions further into the AI realm.
"If you go through the businesses, so their wireless business, it's mostly Apple. And for the stuff that they sell into Apple, they're mostly sole-sourced. It's RF [radio frequency] and connectivity," Rasgon breaks down the corners of tech Broadcom is concentrated in. "Same thing in like storage. Their market share is high in broadband. It's cable modems and set up their shares very high. In networking, just sort of traditional networking, it's switching and routing. It's mostly them and Marvell."
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This post was written by Luke Carberry Mogan.