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Broadcom Inc. (AVGO) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
Zendesk (ZEN) closed at $83.88 in the latest trading session, marking a +1.16% move from the prior day.

Broadcom Inc. (AVGO) closed at $264.19 in the latest trading session, marking a -0.5% move from the prior day. This change lagged the S&P 500's daily loss of 0.21%. At the same time, the Dow lost 0.09%, and the tech-heavy Nasdaq lost 0.18%.

Coming into today, shares of the chipmaker had lost 1.33% in the past month. In that same time, the Computer and Technology sector gained 2.89%, while the S&P 500 gained 1.81%.

Investors will be hoping for strength from AVGO as it approaches its next earnings release, which is expected to be March 14, 2019. On that day, AVGO is projected to report earnings of $4.32 per share, which would represent a year-over-year decline of 8.33%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.82 billion, up 9.34% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $18.59 per share and revenue of $24.39 billion. These totals would mark changes of -1.3% and +16.98%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for AVGO. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. AVGO is currently a Zacks Rank #3 (Hold).

Looking at its valuation, AVGO is holding a Forward P/E ratio of 11.69. For comparison, its industry has an average Forward P/E of 17.58, which means AVGO is trading at a discount to the group.

Meanwhile, AVGO's PEG ratio is currently 0.98. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. The Electronics - Semiconductors was holding an average PEG ratio of 1.61 at yesterday's closing price.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 185, which puts it in the bottom 28% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

To follow AVGO in the coming trading sessions, be sure to utilize Zacks.com.


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