Semiconductor and enterprise-software manufacturer Broadcom (NASDAQ:AVGO) recently printed fiscal second-quarter financial results that failed to impress some folks in the trading community. Nonetheless, informed investors can unpack some encouraging details that suggest a bright future for AVGO stockholders.
Importantly, the negative impact of the spread of the novel coronavirus appears to have been minimal for Broadcom. Therefore, even if a second big wave of infections occurs, the AVGO share price could hold steady. Or, it could drop but not as much as the overall stock market.
Additionally, analysts generally appear to be bullish on the future prospects of AVGO stock. Their opinion isn’t the be-all and end-all for investors, but their moderately optimistic outlook seems to be justified. So, if you’re already holding AVGO shares, at least you’ve got the stamp of approval from some high-profile financial experts.
A Closer Look at AVGO Stock
The AVGO stock price hit a snag in the second week of June, but overall the bulls are fully in control now. However, the market tested the patience of the shareholders as the price action was mainly sideways in April and part of May.
What the bulls really want to see is a clear and decisive push far above the resistance level at $300. AVGO stock has reached that price point multiple times and even breached it. Yet, the buyers always seem to capitulate as the sellers take back control and push the price down.
A decent forward annual dividend yield of 4.43% should provide investors with some income, even if they don’t buy AVGO shares at the perfect time. For long-term investors especially, market timing is less important than taking a stake in a profitable company with solid financials.
Emerging From the Panic
As you may recall, March was a time when the stock market was in panic mode. In that month and the next one, a number of companies withdrew their full-year fiscal guidance. That’s not a great sign, but sometimes it’s necessary to do that when the global economic outlook is uncertain.
And so, Broadcom joined the pack and pulled its full-year fiscal guidance. Understandably, there were ongoing concerns about the financial impact of the coronavirus taking a major toll on the semiconductor market and on Broadcom, in particular.
In hindsight, though, we now know that the Nasdaq Composite index staged a swift rebound after the stock market bottomed out in the middle of March. Tech stocks, and specifically semiconductor stocks, have demonstrated their post-crisis resilience.
Broadcom is a case in point here, and the company’s second-quarter financial results provide evidence of this.
Results Meet Expectations
In breaking down the numbers, we can conclude that Broadcom is at least on firm financial footing. For instance, the analyst community had expected adjusted earnings of $5.14 per share for Broadcom’s Q2. The actual result was in line with this expectation at precisely $5.14 per share.
In regard to quarterly revenues, the analysts’ consensus estimate was $5.69 billion. The actual figure turned out to be $5.74 billion, which beat both the estimate and the year-ago quarter’s $5.52 billion.
Broadcom President and CEO Hock Tan justifiably viewed the data as positive, given the challenging circumstances. “Second-quarter results were in line with our expectations, and saw limited impact from the effects of COVID-19,” he said.
Analysts seem to concur with Tan’s glass-half-full assessment. For instance, Argus analyst Jim Kelleher recently reiterated his “Buy” rating on AVGO stock and raised his price target to $350 from $250.
Similarly, Piper Sandler analyst Harsh Kumar reaffirmed his rating of “overweight” on the stock and lifted his price target to $360 from $300. Furthermore, KeyBanc Capital Markets analyst John Vinh kept his “overweight” rating for AVGO stock while raising his price objective to $360 from $290.
The Bottom Line on Broadcom Stock
It would be disingenuous to call AVGO a completely pandemic-resistant stock. Nevertheless, Broadcom stock has held up well throughout the crisis. The company has the data to prove it, and that should provide comfort to AVGO shareholders.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
