Bank of America said on Thursday that chip manufacturer Broadcom looks very likely to become the next member of the trillion dollar club in the US stock market.
Earlier on Thursday, the semiconductor manufacturer announced unexpected performance and announced a "1 spin 10" stock split plan. The company's stock price soared significantly as a result, with Broadcom up 12.27% to $1678.99 as of the close.
However, Bank of America believes that even after releasing impressive performance reports, Broadcom still has greater potential. In the latest report released by the bank on Thursday, Bank of America analysts raised the company's target price to $2000, which means the stock can still rise by about 19% from its current level.
In this report, Bank of America reiterated its "buy rating" for Broadcom and stated that the stock, like Nvidia, is the best choice in the field of artificial intelligence (AI). You should know that if Bank of America's target stock price comes true, Broadcom will become a member of the trillion dollar club with a market value.
"Because Broadcom seems to be in a unique position, it can achieve growth in the following areas: 1) customized artificial intelligence chips (complementary to Nvidia Business Accelerator), 2) Ethernet networks (leveraging exponential growth in artificial intelligence clusters), and 3) VMware upsales (enabling businesses to deploy local artificial intelligence)." Strategists write.
VMware is a company in the United States that provides software and services for cloud computing and hardware virtualization. It was the first company to virtualize x86 architecture and achieve commercial success. Botong acquired the company last year.
Positive factors
Botong is one of the semiconductor manufacturers boosted by the AI boom, as their chips are used to power underlying software. The company stated that in the second quarter of this fiscal year, $3.1 billion in sales were related to artificial intelligence products. The strong sales outlook has also helped the stock soar, with the company expecting sales of $51 billion for this fiscal year, slightly higher than market expectations.
Bank of America believes that this momentum will continue. The bank has raised its sales forecast for the fiscal year 2025 to $59.9 billion, a year-on-year increase of 16%. The main positive factors will be semiconductor sales and VMWare.
"Secondly, we have noticed that Broadcom's debt repayment (over $8 billion annually) may create more space for further mergers and acquisitions next year. Thirdly, the double-digit FCF (Free Cash Flow) growth in fiscal year 24 may lead to an additional 10% increase in dividends by the end of this fiscal year," analysts wrote.