TLDR
- Jim Cramer called Broadcom a potential bargain on Mad Money, saying the stock “may be too cheap to ignore” after dropping over 10% in a month
- AVGO is down roughly 7% since its September 2 earnings report, and sits about 30% below its all-time high
- Fiscal Q3 revenue hit $29.6 billion, up 85.5% year-over-year, with AI chip revenue surging 221% to $16.7 billion
- Broadcom raised its full-year AI revenue guidance to $58 billion, with projections of $230 billion by fiscal 2028
- Forward P/E has compressed to 18.1x, while fundamental models point to a fair value of $459.95, implying 35.5% upside
Broadcom is trading at around $347 as of September 17, up roughly 2.3% on the day, but still sitting well below its June highs.
Jim Cramer used his September 14 Mad Money episode to flag Broadcom as one of the more interesting names in a battered AI sector. His take was straightforward: the stock has been punished too hard for what he sees as a minor disappointment in quarterly guidance.
“Down here, roughly 150 points below its June high, the stock may be too cheap to ignore,” Cramer said.
The selloff Cramer is referring to started on September 2, when Broadcom posted fiscal Q3 results. Revenue came in at $29.59 billion, above the $29.25 billion expected. AI semiconductor revenue alone hit $16.7 billion, up 221% year-over-year.
Despite that beat, the stock fell 3.39% on the day. The market’s issue was guidance. Near-term projections were viewed as in-line rather than the blowout beats investors had come to expect.
That reaction has become something of a pattern. Fiscal Q2 followed the same script: a solid beat, then a 13% drop.
Guidance and Growth Targets
Management lifted full-year AI revenue guidance to $58 billion, up from $56 billion. Beyond that, they projected $115 billion in fiscal 2027 and $230 billion in fiscal 2028. Remaining performance obligations stand at $179.2 billion, giving visibility into future contracted revenue.
Broadcom counts Alphabet and Meta among its hyperscale AI customers, supplying custom accelerators and high-speed networking solutions to some of the largest AI buildouts in the world.
Overall revenue grew 85.5% year-over-year in fiscal Q3, and levered free cash flow reached $39.4 billion as of July 31. Return on equity stands at 44.2%.
Valuation and Technicals
The post-earnings selloff has pulled AVGO’s forward P/E down to around 18.1x, a compression from where it was trading earlier this year. On trailing earnings, it still sits at 42.4x. Free cash flow yield is 2.4%.
Fundamental models put fair value at $459.95, suggesting 35.5% upside from current levels. Analyst price targets imply even more, with consensus upside of around 57.6% as of late July.
The technical picture is less encouraging. Daily and weekly signals both read Strong Sell. Daily RSI sits at 32.46, near oversold territory. Weekly RSI is 43.26.
Hedge fund interest remains strong. According to Insider Monkey data, 170 hedge funds held positions in Broadcom as of the most recent quarter, down only slightly from 173 the prior quarter. Fisher Asset Management held the largest position at 15.1 million shares.
Short interest is minimal, with just 1.08% of float sold short as of August 31.
AVGO is currently trading at $347.30, up $7.79 on the day.
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