How Does This Analyst Think Broadcom (AVGO) Is Going to Fight Off the Competition?


Broadcom (AVGO) has a new – or should we say more recent competitor – Amazon. Though the market just got a bit more saturated, RBC Capital analyst Amit Daryanani sticks to his chips when it comes to AVGO, saying it remains the attractive arms dealer in ASIC. The analyst rates the stock Outperform with a price target of $290. (To watch Daryanani’s track record, click here)

Amazon announced at its user conference this week that AWS Gravition Processor is adding a 3rd chip option for cloud customers in addition to instances that call for INTC and AMD. Daryanani says the news will make for a unique moment in the tech world that actually could benefit AVGO.

“We think this is a growing trend with hyperscale customers building their own silicon to tackle specific problems related to AI/machine learning. This could pose an incremental threat to the semcionductor landscape; the trend towards ASIC – could be uniquely beneficial to AVGO. AMZN is building upon its 2015 acquisition of Annapurna Labs, to launch its ASIC solutions. We think AVGO’s custom ASIC solutions can unlock further upside especially as we think about revenues over the next 2-4 years. AVGO has been involved in co-designing a number of ASIC solutions for hyperscale, enterprise and service providers for AI/machine learning workloads. Notable ones are Google’s Tensor Processing Unit (TPU) for AI, Alibaba (ASIC for AI), CSCO (switching/routing ASIC chips) and a host of other hyperscale and upcoming semiconductor companies,” Daryanani explains.

The analyst continues to explain he sees multiple tailwinds stacking up including a 40% dividend uptick on 12/6, a sizable accretion upside versus expectations over the next two quarters via CA and attractive valuation given a largely non-cyclical business.

Furthermore, Daryanani believes AVGO is engaged with 10 or more other customers with a large range of companies including emerging semiconductior companies and service providers. He sees expansion on the horizon – and so do 18 others.

TipRanks reviewed 24 analysts who are focusing on Broadcom. According to the analytics, the Street considers it a Strong Buy. The stock has 19 bulls and 5 bears. The consensus price target aligns precisely with that of Daryanani’s, at $290. (See AVGO’s price targets and analyst ratings on TipRanks)

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