AVGO Stock Is Soaring Because Broadcom Just Announced a $10B Catalyst


Semiconductor company Broadcom (NASDAQ:AVGO) is up nearly 10% today after the company delivered a strong earnings report and announced a $10 billion share buyback program.

broadcom (AVGO) logo outside office building

Source: Sasima / Shutterstock.com

The well-received quarterly earnings are further evidence of the continued strength among semiconductor companies despite a global shortage of chips that is impacting the manufacturing of everything from cars to video game consoles.

Broadcom’s results were mostly due to the company seeing a resurgence in enterprise spending and rising demand from cloud computing companies.

What Happened With AVGO Stock

Broadcom announced revenues of $7.4 billion, a 15% year-over-year increase and better than the $7.36 billion estimate. Earnings per share came in at $7.81, also ahead of the $7.72 per share that Wall Street was calling for.

Broadcom also provided equally strong forward guidance, with management saying they now expect revenue of $7.6 billion for the fiscal first quarter. That comes in well above the company’s previous guidance of $7.2 billion. The company is also now calling for a 61.5% EBITDA margin, higher than its previous target.

The strong results, coupled with bullish forward guidance and the $10 billion stock buyback, have AVGO shares jumping higher. Plus, Broadcom announced a 14% increase to the company’s common stock dividend, further adding to the momentum in the share price today.

Why It Matters

The results strengthen the case that Broadcom is a market leader in the semiconductor space.

Building on this, its management team spent time highlighting Broadcom’s solutions, which they say give customers more bandwidth and faster speeds. It is a good sign then that the team is forecasting significant revenue growth, strengthening the bull case for AVGO stock.

Broadcom’s solid quarter also led to the company rewarding shareholders with a boost to the quarterly dividend and an aggressive share buyback program that will add value to shareholders’ investment. The share buyback and enhanced dividend give new investors an incentive to buy AVGO stock and are part of the reason for the big increase in the company’s share price today.

What’s Next for Broadcom

AVGO stock is going to see a nice boost today and the gains in the share price should continue as sustained momentum builds around Broadcom and its future outlook. Its quarterly results were great, but its forward guidance was equally impressive and should help carry the stock to new heights.

Before today, Broadcom’s stock had risen 37% year to date. Expect continued upside over the near term.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Article printed from InvestorPlace Media, https://investorplace.com/2021/12/avgo-stock-is-soaring-because-broadcom-just-announced-a-10b-catalyst/.

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