Buy Broadcom due to an undervalued A.I. portfolio, Bank of America says
Bank of America thinks chipmaker Broadcom can thrive in the ongoing artificial intelligence boom. The bank raised its price target on the stock to $950 from $800 and reiterated its buy rating. BofA's new forecast represents more than 20% upside compared to the stock's $789.95 close Thursday. Analyst Vivek Arya said while BofA is taking "a conservative approach" in models on Broadcom, exposure to AI could amount to roughly 20% of total sales while the company's core semiconductor business can grow between 2% and 3%. This outlook contributes to BofA's forecast of fiscal year 2024 sales and earnings per share of $39.4 billion and $46.59 per share, respectively. Broadcom could add more to sales and EPS due to AI exposure. "In a bull case scenario where AVGO can grow AI exposure to ~25% of sales (and hold growth rates of non-AI assets at previously mentioned levels), we see incremental $2bn/$3 upside to our sales/EPS estimates," Arya said, calling the company's AI portfolio "underappreciated." The stock has been looped up into the rising tide of AI beneficiaries with a 41% gain in 2023. AVGO YTD mountain Broadcom stock has added nearly 42% from the start of the year. — CNBC's Michael Bloom contributed to this report.