Broadcom (NASDAQ:AVGO) is constantly in the financial news lately because of an upcoming event. This can cause investors to become distracted and try to “game the system” by getting ahead of other stock traders. Stay focused on what’s important. Broadcom stock is a “B” grade stock for a right-sized position.
Just to recap, Broadcom provides networking chips and designs custom chips for artificial intelligence applications. Broadcom’s CEO attributed their quarterly results to “AI demand.” It’s okay to invest in Broadcom as long as you avoid over-allocation and hype.
Broadcom: Here’s the News Everybody’s Talking About
Speaking of hype cycles, it feels like some commentators are more interested in an upcoming share split than Broadcom’s fundamentals. Remember, a share split doesn’t affect the intrinsic value of a stock or a company.
In case you haven’t heard it already, Broadcom announced a 10-for-1 forward share split. Broadcom stock will begin trading on a split-adjusted basis starting on the morning of July 15.
Don’t be clever or “game the system” by loading up on Broadcom shares ahead of July 15. It’s too late to leapfrog ahead of other stock traders. The market priced its enthusiasm immediately after the stock split announcement, with Broadcom stock shooting up like a rocket.
Sure, Broadcom shares will be more affordable post-split. But again, the market already knows this and large-scale traders already priced all available information and expectations into the shares. So, let’s move on and focus on other reasons to consider a right-sized investment in Broadcom.
Broadcom Can ‘Dominate’ a Lucrative Market
Here’s a more sensible reason to consider buying Broadcom stock. JPMorgan Chase analysts expect Broadcom can “dominate” the high end of the market for custom chips.
Furthermore, the JPMorgan Chase analysts envision the high end of the application-specific integrated circuit (ASIC) market reaching $20 billion to $30 billion. In other words, Broadcom can take a big piece of a big pie, financially speaking.
Because of the upcoming stock split, some investors might have overlooked Broadcom’s impressive sales growth. In fiscal 2024’s second quarter, Broadcom’s revenue jumped 43% year over year to $12.487 billion.
And by the way, Broadcom also offers a decent dividend. Bank of America Securities analyst Vivek Arya recently noted Broadcom’s “dividend growth and above market dividend yield.”
As it turns out, Broadcom offers a 1.18% forward annual dividend yield, versus the average technology-sector dividend yield of 1.025%.
Broadcom Stock: Know Why You Own It
The upcoming stock split won’t affect Broadcom’s intrinsic value and has already been discounted into the shares. Consequently, investors shouldn’t over-invest in Broadcom in anticipation of the share split.
Still, it’s fine to take a reasonably sized share position in Broadcom as long as you know why you’re doing it. Here’s a hint: focus on the company’s dominant niche-market position, revenue growth and decent dividend.
With those factors in mind, we’re giving Broadcom stock a “B” grade and investors are encouraged to conduct their due diligence on the company.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.