Buy and Hold This 1 Chip Stock for Big-Time Gains in Q4

NASDAQ: AVGO | Broadcom Inc. News, Ratings, and Charts

AVGO – Broadcom (AVGO) shares have been on a downtrend this year amid the broader tech selloff. However, Wall Street analysts are bullish on its near-term prospects, given its solid fundamentals. They see a more than 45% upside potential in the stock. Therefore, investors might consider buying and holding AVGO for big-time gains. Keep reading….

Semiconductor giant Broadcom Inc. (AVGO - Get Rating) has lost 12.9% over the past year and 31.6% year-to-date to currently trade at a reasonable price considering its solid prospects.

The company’s ValueOps solution, Rally Software®, recently achieved Federal Risk and Authorization Management Program (FedRAMP) authorization.

Serge Lucio, vice president and general manager Agile Operations Division, AVGO, said, “FedRAMP creates a partnership between the federal government and industry. We are particularly proud of this authorization as it builds on our long-standing relationship with our government customers.”

Also, on October 11, 2022, AVGO announced the availability of the industry’s first open end-to-end networking solution optimized for Remote Direct Memory Access over Converged Ethernet. This solution is co-developed by AVGO and Arista and is a one-of-a-kind contribution to the seamless deployment of RoCE.

AVGO’s steady earnings stream has allowed it to reward its shareholders over the past decade attractively. Its dividend payments have grown at CAGRs of 32.1% and 15.7% over the past five years and three years, respectively. Its current dividend yields 3.60%, while its four-year average yield is 3.23%.

While the stock has declined significantly amid the broader market sell-off, Wall Street analysts expect it to hit $668.00 in the next 12 months, indicating a potential upside of 45.7%.

Here is what could shape AVGO’s performance in the near term:

Solid Financials

AVGO’s net revenues came in at $8.46 billion for the third quarter that ended July 31, 2022, up 24.9% year-over-year. Moreover, its net income came in at $3 billion, up 66.4% year-over-year. Also, its EPS came in at $7.15, up 70.2% year-over-year. In addition, its adjusted EBITDA came in at $5.38 billion, up 30.4% year-over-year.

Attractive Valuation

AVGO’s forward EV/EBITDA of 10.38x is 14.5% lower than the industry average of 12.15x. Its forward P/E of 17.35x is 18.1% lower than the industry average of 21.18x. Also, its forward Price/Cash Flow of 11.49x is 28.4% lower than the industry average of 16.04x.

Robust Profitability

AVGO’s trailing-12-month gross profit margin of 75.13% is 49.3% higher than the industrial average of 50.33%. Its trailing-12-month EBITDA margin of 57.33% is 372.5% higher than the industry average of 12.13%, while its trailing-12-month net income margin of 31.96% is 717.4% higher than the industrial average of 3.91%.

In addition, its trailing-12-month ROCE, ROTC, and ROTA of 43.46%, 12.87%, and 14.20%, compared with the industry averages of 6.71%, 3.73%, and 2.47%, respectively.

POWR Ratings Reflect Promising Outlook

AVGO has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Quality, consistent with higher-than-industry profitability margins. It has a B grade for Growth, in sync with its solid financials in the latest reported quarter.

In the 93-stock Semiconductor & Wireless Chip industry, AVGO is ranked #6. The industry is rated B.

Click here for the additional POWR Ratings for AVGO (Value, Momentum, Stability, and Sentiment).

View all the top stocks in the Semiconductor & Wireless Chip industry here.

Bottom Line

AVGO delivered a strong performance in the last reported quarter. Moreover, its revenue and EPS are expected to increase 20.9% and 33.7% year-over-year to $33.18 billion and $37.44, respectively, in 2022. Given the stock’s solid fundamentals, it looks poised to deliver solid returns in the coming months.

How Does Broadcom Inc. (AVGO) Stack Up Against its Peers?

While AVGO has an overall POWR Rating of B, one might consider looking at its industry peers, STMicroelectronics N.V. (STM - Get Rating), Renesas Electronics Corporation (RNECF - Get Rating), and Xperi Inc. (XPER - Get Rating), which have an overall A (Strong Buy) rating.

Want More Great Investing Ideas?

3 Stocks to DOUBLE This Year


AVGO shares were trading at $469.60 per share on Friday morning, up $14.20 (+3.12%). Year-to-date, AVGO has declined -27.76%, versus a -17.94% rise in the benchmark S&P 500 index during the same period.


About the Author: Riddhima Chakraborty


Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
AVGOGet RatingGet RatingGet Rating
STMGet RatingGet RatingGet Rating
RNECFGet RatingGet RatingGet Rating
XPERGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


How Low Will Stocks Go?

The S&P 500 (SPY) is testing the 200 day moving average with fears on tariffs and GDP that could push them even lower. Now is a good time to hear what 40 year investment veteran Steve Reitmeister says about the market outlook and odds of bear market.

Yelp Inc. (YELP) vs. TripAdvisor, Inc. (TRIP): Which Online Review Platform Offers Better Investment Potential?

The online review industry is anticipated to be bolstered by increasing penetration rates of connected devices, easy availability of high-speed internet, and advanced technology. To analyze which stock offers better investment potential, let’s compare online review platform stocks Yelp (YELP) and Tripadvisor (TRIP). Read on to find out…

3 Healthcare Stocks Tackling America’s Biggest Medical Challenges

From breakthrough treatments to AI-driven diagnostics, healthcare is evolving faster than ever. With increasing healthcare spending and innovative technologies transforming patient care, companies like AbbVie (ABBV), Gilead Sciences (GILD), and Bristol-Myers Squibb (BMY) are tackling some of the biggest challenges and could be poised for long-term growth. Read more…

Vimeo vs. Olo Inc.: Which Software Stock Is Poised for Greater Growth?

A rising adoption of software solutions by several industries is brightening the prospects for the software industry. Amid this, let’s compare Vimeo (VMEO) and Olo Inc. (OLO) to analyze which software stock is poised for greater growth. Read on to find out…

Why is Stock Market Outlook So Uncertain?

The S&P 500 (SPY) has quickly pushed back from the highs and once again on the verge of a break below the 100 day moving average. Why is this happening? And what comes next? 40 year investment veteran Steve Reitmeister shares his view and top stocks in the commentary that follows...

Read More Stories

More Broadcom Inc. (AVGO) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All AVGO News