For the most part, equity analysts are a cautious bunch. They tend to set price targets for stocks that are not too outrageously higher or dramatically lower than current market levels.
So it it catches investors’ eyes when a pundit establishes or maintains an outlier target. Such is the case with Broadcom (NASDAQ: AVGO) stock and one of its more eager analyst advocates.
One analyst sees a 53% upside potential
Last week, KeyBanc‘s John Vinh reiterated his $210 price target on Broadcom stock, a level that was 53% above the stock’s most recent closing price. Almost needless to say, the highly bullish Vinh rates the shares as overweight (read: buy).
Vinh is one of several prognosticators reiterating their positive views on Broadcom’s future. His report followed Broadcom’s just-released fiscal third-quarter earnings release, which featured strong top-line growth of 47% year over year. Non-GAAP (adjusted) net income also leaped higher, by 33% year over year. Both line items topped the consensus analyst estimates, although not spectacularly.
There’s a problem with many tech equipment companies like Broadcom that are strongly linked to the development of artificial intelligence (AI): In many cases, their prices were soaring early this year. And because of this, more than a few investors expect such businesses to outperform. Since Broadcom’s third quarter was good but not historic, many sold out of the stock.
All in on AI
Describing the period’s results as “solid,” Vinh pointed out that the company did notably well in all of its key segments. He mentioned that its business in AI accelerators — as the name suggests, specialized devices that speed up the processing of AI workloads — increased a hard-to-believe 350% in the frame.
Broadcom is one of the equipment makers best positioned to be winners in the AI game. Since the technology has vast potential, to put it mildly, I wouldn’t be concerned about the stock’s still relatively high valuation. I agree with Vinh that it has far more room to run, and think his ambitious price target might even be too modest.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
1 Wall Street Analyst Thinks AI Stock Broadcom Is Going to $210. Is It a Buy? was originally published by The Motley Fool
