Broadcom (NASDAQ:AVGO) began trading at a lower price after its stock split after markets closed on Friday. Investors who held 10 shares on July 12 now hold 100.
A split, by itself, has no financial impact. However, it shows management’s confidence in a company’s future and encourages buying by small investors.
Today will also be the first day of trading since Broadcom announced its second-quarter results. A net income of $2.1 billion, $4.42 per share, on revenue of nearly $12.5 billion, is a tradeable event. Revenue was up 43% year-over-year.
Broadcom was up slightly in pre-market trading by about 0.5%. It opened at $170.50, a market capitalization of about $800 billion.
The VMware Rally
Broadcom makes data center equipment and software. It has been a hot stock in 2024, up 84% so far. Analysts at Tipranks expect to see more gains, with 22 of 23 having it on their buy lists. Traders at Stocktwits are also high on it.
The acquisition of virtualization software giant VMware late last year has supercharged the stock. CEO Hock Tan is known for squeezing profits from his subsidiaries, and VMware is no exception.
Critics charge that changing from enterprise licensing to consumption licensing for the software will hike costs by 200-300%. Rival Microsoft (NASDAQ:MSFT) calls it “the greatest gift of all,” believing it accelerates the move to the cloud.
So far, however, the price hikes are sticking due to the high cost of dropping the software. Customers may be unhappy, and looking for alternatives, as rivals claim, but they’re paying.
Broadcom paid $69 billion for VMware and is selling bonds to help pay for it. Meanwhile, the rest of its products, including Symantec security software, mainframe software, storage and networking products, remain profitable.
Broadcom Stock: What Happens Next?
Enterprise tech spending continues to accelerate on artificial intelligence (AI) hype, and Broadcom continues to benefit. The stock will keep rising until AI hype meets reality.
As of this writing, Dana Blankenhorn had a LONG position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
