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

Zacks Equity Research

Broadcom Inc. (AVGO) closed at $268.64 in the latest trading session, marking a -1.08% move from the prior day. This change lagged the S&P 500's daily gain of 0.25%. At the same time, the Dow added 0.39%, and the tech-heavy Nasdaq lost 0.09%.

Prior to today's trading, shares of the chipmaker had lost 4.74% over the past month. This has was narrower than the Computer and Technology sector's loss of 5.18% and the S&P 500's loss of 5.58% in that time.

AVGO will be looking to display strength as it nears its next earnings release, which is expected to be September 12, 2019. The company is expected to report EPS of $5.09, up 2.21% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $5.50 billion, up 8.69% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $21.35 per share and revenue of $22.73 billion, which would represent changes of +2.55% and +9.03%, respectively, from the prior 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 such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

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 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 has moved 1.18% lower within the past month. AVGO is holding a Zacks Rank of #4 (Sell) right now.

Digging into valuation, AVGO currently has a Forward P/E ratio of 12.72. For comparison, its industry has an average Forward P/E of 18.85, which means AVGO is trading at a discount to the group.

Meanwhile, AVGO's PEG ratio is currently 1.07. 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 2.01 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 104, putting it in the top 41% 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.

You can find more information on all of these metrics, and much more, on Zacks.com.


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