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Quick Look
- Broadcom shares have taken an absolute beating after the company's latest earnings report.
- ORCL's and AVGO's earnings helped reanimate AI bubble concerns. However, analyst sentiment is moving in very different directions for these two stocks.
- See just how much upside analysts are forecasting in AVGO shares.
Since reporting earnings on Dec. 11, investors have hit shares of semiconductor giantBroadcom (NASDAQ: AVGO) with a tidal wave of selling. On Dec. 17, Broadcom shares closed near $326. This marks an approximately 20% decline versus the stock’s pre-earnings level near $406.
Despite this, sell-side Wall Street analysts are doubling down. By and large, these forecasters significantly raised their Broadcom price targets after the company’s earnings release. Analyst reactions to Broadcom’s results reveal a mix of optimism and caution, especially when contrasted with another major AI company that recently reported earnings. All price target references reflect data tracked by MarketBeat.
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Updated Targets See +40% Upside in Broadcom
The MarketBeat consensus price target on Broadcom stands at just under $436. After the stock’s precipitous fall, this figure implies around 34% upside potential in shares. However, Wall Street analysts who updated their targets after earnings are showing even more bullishness around the stock. Among more than 15 post-earnings targets, the average comes in just below $468. That target suggests that Broadcom shares could rise by 44%.
Notably, every single analyst for whom MarketBeat previously had price target data raised their target after the earnings release. In fact, the average target among these analysts rose by almost 11%. This is a very stark contrast to the stock’s 20% fall. Overall, this data suggests that analysts do not believe that Broadcom’s earnings warranted a sell-off, especially such a large one.
Furthermore, not a single updated target comes in below Broadcom’s Dec. 17 closing price. The lowest updated target comes from Robert W. Baird at $420, implying 29% upside. Not too long ago, a $420 price target would be among the most bullish on Broadcom.
On the other side of the equation, Broadcom’s highest updated price target is $500. Truist Financial, Barclays, KeyCorp, and Bank of America all placed a $500 target on the stock after earnings. This figure implies huge upside potential in shares to the tune of 53%.
Amid “AI-Bubble” Worries, Analysts' Takes on ORCL and AVGO Diverge
Many stocks linked to artificial intelligence (AI) have sold off big time since Oracle (NYSE: ORCL) and Broadcom reported earnings. Oracle reported earnings on Dec. 10, one day before Broadcom. Since then, NVIDIA (NASDAQ: NVDA) is down over 5%, and the iShares Semiconductor ETF (NASDAQ: SOXX) is down around 10%. News outlets have repeatedly cited Oracle and Broadcom’s back-to-back earnings as the source of reigniting AI bubble fears. However, it is worth pointing out that analysts are not viewing these companies' earnings in a similar light.
Since reporting earnings, Oracle is down 20%. The MarketBeat consensus price target on Oracle sits near $303, indicating 70% upside. However, every analyst for whom MarketBeat had previous price target data lowered their targets after earnings. On average, these analysts lowered their targets by around 18%.
This shows that analysts believe Oracle’s fall was much more warranted than Broadcom’s. Despite these stocks experiencing similar losses, analyst sentiment is moving in a positive direction at Broadcom and in the wrong direction at Oracle. This provides evidence that, when it comes to AI bubble fears, investors should not necessarily put Oracle and Broadcom in the same box.
Oracle and Broadcom are on different ends of the AI value chain. Broadcom is a supplier of chips and hardware, while Oracle is a buyer and operator. Investors should not take this to mean that Oracle is a large Broadcom customer. Broadcom is cranking out cash, generating nearly $7.5 billion in free cash flow (FCF) last quarter. Meanwhile, Oracle’s FCF was -$10 billion. It added around $18 billion in long-term debt, while this figure fell by almost $1 billion at Broadcom. Still, the need for AI infrastructure to generate a strong return on investment for buyers like Oracle is key to the health of the entire ecosystem.
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Analysts Love AVGO, Markets Have Yet to Come Around
Overall, Wall Street price targets are clearly suggesting that there is a significant opportunity in Broadcom stock. However, whether markets will come to agree with this is still very much up in the air. MarketBeat will provide upcoming coverage diving deep into the specific issues many investors have with Broadcom and evaluate the merits of these concerns.
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