Broadcom shares traded up 1.3% on Tuesday, reaching a high of $397.33 before settling at $389.11. The stock showed mixed trading activity with approximately 18.6 million shares changing hands during mid-day trading, representing a 29% decline from the average daily volume of 26.3 million shares. The stock had previously closed at $384.05, showing some recovery from recent pressure. Despite the positive daily movement, the stock remains about 21% below its 52-week high of $495, with earnings scheduled for September 2.
JPMorgan analyst Harlan Sur's aggressive buy recommendation for Broadcom (NASDAQ: AVGO) has gained significant momentum on Wall Street, with nearly every major bank now backing the stock. Sur issued the buy call on June 17, maintaining an Overweight rating and $580 target price, representing a 49% upside from the current trading level near $389. The stock remains about 21% below its 52-week high of $495, with earnings scheduled for September 2. However, one of the company's own executives has taken a contrary position - Chief Legal Officer Mark Brazeal sold 25,000 shares for approximately $9.48 million on July 8, trimming his stake by roughly 10% and leaving him with about 220,000 shares.
The investment case received significant validation when Apple committed more than $30 billion to Broadcom through 2031 for over 15 billion US-made chips. As reported by CNBC, this deal, announced on July 8, involves custom ASIC silicon that will power Apple's Baltra servers, the backbone of its cloud-based AI features. The agreement positions Broadcom as the anchor for custom-chip plans of Apple, Google, and Meta simultaneously. Following this announcement, Bank of America and William Blair joined JPMorgan with buy ratings, while Morgan Stanley's Joseph Moore lifted his target to $502 and called Broadcom a close number two behind Nvidia. Recent analyst reports continue to support the bullish outlook, with JPMorgan raising their target price from $500 to $580 and Benchmark boosting their price target from $485 to $545.
Despite the positive developments, Broadcom experienced a strange market reaction after reporting record second-quarter revenue of $22.19 billion on June 3, representing approximately 48% year-over-year growth and beating profit expectations. According to CNBC reports, the stock dropped about 20% in a week following the earnings announcement. The concern centered on margin compression, with gross margin expected to ease to about 74% from 77% as lower-margin AI chips take a larger share of the business. However, AI sales demonstrated strong momentum, jumping 143% to $10.8 billion, with guidance pointing to approximately $16 billion next quarter. The company reported $2.44 earnings per share for the quarter, beating analysts' consensus estimates of $2.40 by $0.04.
Recent institutional activity shows continued confidence in Broadcom's prospects, with several hedge funds and institutional investors modifying their holdings. Trust Asset Management LLC grew its position by 1.3% during the second quarter, now owning 52,549 shares worth $19.85 million. First Community Trust NA lifted its position by 1.9%, while Ballast Inc. increased its stake by 39.5%. Institutional investors currently own 76.43% of the company's stock, with the stock having a market capitalization of $1.85 trillion and a PE ratio of 64.85. The technical indicators present a mixed picture, with the stock's Chaikin Money Flow continuing to drift lower, reflecting cautious market sentiment, though the recent trading activity suggests some renewed interest in the semiconductor giant.
