Broadcom Inc. (NASDAQ:AVGO) just released its second-quarter report and things are looking bullish. Broadcom beat earnings, with revenues hitting US$12b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 11%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Broadcom's 37 analysts is for revenues of US$51.4b in 2024. This would reflect a huge 21% increase on its revenue over the past 12 months. Statutory earnings per share are expected to drop 11% to US$19.56 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$50.3b and earnings per share (EPS) of US$19.15 in 2024. It looks like there's been a modest increase in sentiment following the latest results, withthe analysts becoming a bit more optimistic in their predictions for both revenues and earnings.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 17% to US$1,790per share. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic Broadcom analyst has a price target of US$2,100 per share, while the most pessimistic values it at US$1,051. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Broadcom shareholders.
Of course, another way to look at these forecasts is to place them into context against the industry itself. The analysts are definitely expecting Broadcom's growth to accelerate, with the forecast 45% annualised growth to the end of 2024 ranking favourably alongside historical growth of 13% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 18% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Broadcom to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Broadcom's earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting them to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on Broadcom. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Broadcom analysts - going out to 2026, and you can see them free on our platform here.
And what about risks? Every company has them, and we've spotted 4 warning signs for Broadcom you should know about.
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