Key Takeaways:
- The 2-Minute Valuation Model values Broadcom stock at $225/share in about 2 years.
- That’s a potential 46% upside from today’s price of around $154/share.
- Broadcom is trading at its lowest P/E multiple in years after fears that there’d be a decrease in AI spending.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
Broadcom Inc. (AVGO) is a leader in the semiconductor industry and has consistently demonstrated strong performance and resilience.
Broadcom is attracting attention from investors after the stock has fallen over 30% in the past 3 months. Today, the stock looks undervalued.
Find the best stocks to buy today with TIKR! >>>
What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why Broadcom Looks Undervalued
Forecast
Broadcom is projected to increase normalized earnings per share by over 35% this year.
Analysts estimate Broadcom’s EPS will reach $9.06 by 2027, so we’ll round it off to $9.00 in expected earnings-per-share that the company will reach in about 3 years.
This earnings growth is likely to be driven by:
- Diversification into high-growth areas
- Strong Demand for Connectivity Solutions
- Strategic acquisitions
View Broadcom’s full analyst estimates >>>
Valuation Multiple
Broadcom has traded at an average forward P/E multiple of 19.3x over the past 5 years, as shown in the historical P/E chart.
Today, the stock is trading near a recent low at just 22 times forward earnings:
This makes the stock look cheap today for investors.
We’ll use a conservative forward P/E multiple of 25 for our valuation, which is well below where the stock has traded for the past year, but a touch higher than where the stock trades today.
Fair Value
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $9
- Conservative forward P/E multiple: 25x
Expected Normalized EPS ($9.00) * Forward P/E ratio (25x) = Expected Share Price ($225)
The 2-year expected share price we would get from this valuation is $225/share.
This presents a substantial potential upside for the stock since the stock today trades at around $154/share.
The stock could have a 44% potential upside over the next 2-ish years, and could see a 20% annualized return:
Keep in mind, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
Analysts’ Price Target
The stock’s target price to current price ratio has surged recently because analysts see a lot of upside for the stock today.
Analysts have an average price target of about $249/share for Broadcom stock today, which means they see over 60% upside for the stock today.
Analyze stocks quicker with TIKR >>>
Risks to Consider
While our valuation suggests a meaningful upside, investors should be aware of several risks:
- Intensifying semiconductor competition
- Regulatory and trade uncertainties
- Economic downturns
- Technology shifts
- Privacy and security concerns
TIKR Takeaway
Broadcom looks undervalued today, and it could be an interesting opportunity for investors to bet on the semiconductor industry.
Broadcom’s stock could deliver 21% annualized returns over the next two years due to the company’s strong projected earnings growth and its low valuation multiple.
Is Broadcom a buy over the next 24 months? Use TIKR to check the stock’s 5-year growth forecasts and other financial metrics to see if the tech stock looks undervalued today.
Looking for New Opportunities?
- See what stocks billionaire investors are buying so you can follow the smart money.
- Analyze stocks in as little as 5 minutes with TIKR’s all-in-one, easy-to-use platform.
- The more rocks you overturn… the more opportunities you’ll uncover. Search 100K+ global stocks, global top investor holdings, and more with TIKR.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
