Key Takeaways:
- The 2-Minute Valuation Model values Broadcom stock at $265 per share in 2 years.
- That’s a potential 27% upside from today’s price of $208 per share.
- AVGO stock is projected to grow EPS by over 86% over the next 3 years.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Valued at a market cap of nearly $1 trillion, Broadcom (AVGO) is a global technology leader that designs, develops, and supplies semiconductor and infrastructure software solutions.
Despite recent market volatility caused by concerns over tariffs and tech sector weakness, Broadcom continues strengthening its position as a critical supplier for AI infrastructure, cloud computing, and wireless communications.
With AVGO stock now trading at $208 per share, Broadcom presents a compelling opportunity for investors looking for a blend of growth and stability at a reasonable valuation.
Let’s see why.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings-per-share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why Broadcom Stock Looks Undervalued
Forecast
Based on analyst estimates shown in the EPS chart, Broadcom is expected to achieve significant earnings-per-share growth.
EPS is projected to grow from $4.87 in fiscal 2024 (ended in October) to $9.07 by 2027, representing an 86% total increase over three years.
Broadcom is expected to see strong 36% growth in 2025, followed by double-digit annual growth in subsequent years.
This earnings growth for AVGO stock is likely to be driven by:
- AI and data center expansion: Broadcom’s custom ASIC chips and networking solutions are essential components for AI infrastructure buildout.
- Synergies from acquisitions: The company continues integrating major acquisitions, including VMware, to expand its enterprise software portfolio.
- Growing demand for connectivity: Broadcom’s wireless and broadband solutions will benefit from ongoing 5G deployment and network upgrades.
- Margin expansion: As the semiconductor scales its software business, it’s seeing improved operating margins across its portfolio.
For our valuation, we’ll estimate that AVGO will reach $9 in EPS in fiscal 2027.
Check out Broadcom’s full analyst estimates (It’s free) >>>
Is AVGO Stock Undervalued Right Now?
Broadcom stock trades at around 30x forward earnings, which is a bit above its 5-year historical average P/E of 20x, as shown in the valuation chart.
However, this premium is justified by the company’s accelerating growth and strategic positioning in high-growth markets.
For our valuation, we’ll use a conservative forward P/E multiple of 29x. This is a bit above its historical average, but it acknowledges the company’s improved growth profile.
Fair Value of Broadcom Stock
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $9
- Conservative forward P/E multiple: 29x
- Expected dividends over the next 2 years: $5
Expected Normalized EPS ($9) * Forward P/E ratio (29x) + Expected Dividends ($5) = Expected Share Price ($265)
The 2-year expected AVGO stock price we would get from this valuation is $265 per share.
With Broadcom stock currently trading at around $208 per share, this implies a potential upside of 27% over the next two years or a 13% annualized return.
AVGO stock is well-positioned to deliver outsized gains to shareholders, given that average annual returns for the broader markets have been around 10%.
Remember, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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What is Analysts’ Target Price for AVGO Stock?
Analysts think that Broadcom stock could have strong upside today.
Analysts have an average price target of around $239 per share for AVGO stock, indicating they see about 15% upside today for Broadcom based on its current share price:
Risks to Consider
Despite the bullish outlook, investors should be aware of several risks that could impact Broadcom’s growth trajectory:
- Tariff impacts: Newly imposed tariffs could affect Broadcom’s global supply chain and increase manufacturing costs.
- Integration challenges: The company’s aggressive acquisition strategy introduces execution risk as it integrates new businesses.
- Competitive pressures: Broadcom faces intense competition in both semiconductor and software markets.
- Cyclical downturn: A broader slowdown in tech spending could impact growth rates in the near term.
TIKR Takeaway
Broadcom presents a compelling risk-reward proposition at its current valuation. The stock’s upside is driven by strong projected earnings growth in the AI and cloud markets and a reasonable valuation multiple.
While macroeconomic challenges remain, Broadcom’s diverse product portfolio, growing software business, and strategic positioning in AI infrastructure provide a solid foundation for long-term growth.
Investors should be prepared for some volatility, but AVGO’s consistent execution and growth trajectory make it an attractive option for those seeking exposure to key technology trends.
Is AVGO stock a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if it is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
