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Broadcom Inc. (AVGO) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, Broadcom Inc. (AVGO) closed at $275.28, marking a +0.99% move from the previous day. The stock outpaced the S&P 500's daily gain of 0.85%. Elsewhere, the Dow gained 0.77%, while the tech-heavy Nasdaq added 1.08%.

Coming into today, shares of the chipmaker had lost 13.46% in the past month. In that same time, the Computer and Technology sector lost 4.99%, while the S&P 500 lost 2.06%.

Wall Street will be looking for positivity from AVGO as it approaches its next earnings report date. This is expected to be June 13, 2019. On that day, AVGO is projected to report earnings of $5.17 per share, which would represent year-over-year growth of 5.94%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.66 billion, up 12.95% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $23.13 per share and revenue of $24.43 billion. These totals would mark changes of +11.1% and +17.18%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for AVGO. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Based on our research, we believe these estimate revisions are directly related to near-team stock moves. We developed the Zacks Rank to capitalize on this phenomenon. Our system takes these estimate changes into account and delivers a clear, actionable rating model.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. AVGO is currently sporting a Zacks Rank of #3 (Hold).

In terms of valuation, AVGO is currently trading at a Forward P/E ratio of 11.78. For comparison, its industry has an average Forward P/E of 17.95, which means AVGO is trading at a discount to the group.

Investors should also note that AVGO has a PEG ratio of 0.97 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Electronics - Semiconductors industry currently had an average PEG ratio of 1.89 as of yesterday's close.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 180, putting it in the bottom 30% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. 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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