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

Zacks Equity Research

Broadcom Inc. (AVGO) closed at $319.62 in the latest trading session, marking a +1.49% move from the prior day. The stock outpaced the S&P 500's daily gain of 0.75%. Meanwhile, the Dow gained 0.69%, and the Nasdaq, a tech-heavy index, added 1.32%.

Heading into today, shares of the chipmaker had gained 11.55% over the past month, outpacing the Computer and Technology sector's gain of 5.59% and the S&P 500's gain of 3.42% in that time.

AVGO will be looking to display strength as it nears its next earnings release, which is expected to be December 12, 2019. In that report, analysts expect AVGO to post earnings of $5.37 per share. This would mark a year-over-year decline of 8.21%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.76 billion, up 5.72% from the year-ago period.

Investors might also notice recent changes to analyst estimates for AVGO. These recent revisions tend to reflect the evolving nature of short-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an 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).

Digging into valuation, AVGO currently has a Forward P/E ratio of 13.51. This valuation marks a discount compared to its industry's average Forward P/E of 21.71.

We can also see that AVGO currently has a PEG ratio of 1.14. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. Electronics - Semiconductors stocks are, on average, holding a PEG ratio of 2.54 based on yesterday's closing prices.

The Electronics - Semiconductors industry is part of the Computer and Technology sector. This industry currently has a Zacks Industry Rank of 32, which puts it in the top 13% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual 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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