Actions of Broadcom (NASDAQ:AVGO) jumped higher today to kick off the week, jumping as much as 4.9%. As of 11:51 a.m. ET Monday, the stock was still up 3.67%.
The catalyst that sent the artificial intelligence (AI) The bullish specialist was growing optimism on Wall Street ahead of its highly publicized stock split.
Lots to love
Last week, Broadcom released solid financial results and announced a stock split that took Wall Street by surprise. The company’s strong results have analysts scrambling to update their price targets, further fueling the stock’s rise. This trend continued this week as more analysts joined the party.
Baird analyst Tristan Gerra maintained an Outperform (Buy) rating on the stock while increasing his price target to $1,950 from $1,500. That’s up 12% from the stock’s closing price Friday, even after its 19% gains last week. The analyst noted a 40% increase in the company’s forecast for networking revenue and an $11 billion forecast for AI revenue.
German Bank Analyst Ross Seymore raised his price target on Broadcom to $1,900 while maintaining a buy rating. He cited the company’s “strong second quarter momentum,” fueled by robust gains in AI and solid progress in integrating VMware into the group.
The Stock Split Boost
The main factor fueling the excitement around Broadcom is the company’s upcoming 10-for-1 stock split, scheduled for next month.
Several top stocks have split their shares this year, sending their prices higher. The most notable example is Nvidiawhich recently completed its own 10-for-1 split. Since its May 22 announcement, Nvidia stock has gained 39%, and investors are hoping for similar gains from Broadcom.
It’s important to remember that there is no guarantee that investors will place the same premium on Broadcom as they do on Nvidia. Additionally, a stock split is only cosmetic and does not change anything about the underlying company.
That said, investor psychology comes into play, and it’s the strength of the underlying business that has propelled shares to new highs, necessitating the split in the first place.
Broadcom currently trades at 36 times forward earnings, and while that’s certainly not cheap, it’s reasonable given the company’s place in the AI revolution.
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