Bank of America analysts have increased the price target for Broadcom (NASDAQ: AVGO) from $2,000 to $2,150, highlighting its shift from a value stock to a growth stock due to rising contributions from AI and VMWare. They forecast Broadcom’s growth rate to double to a 13% CAGR from 2024 to 2026, driven by a 24% CAGR in AI silicon and VMWare, which could soon represent over half of its sales.
Analysts commend Broadcom’s diverse growth drivers, respected management, and strong track record in capital appreciation and dividend growth. Despite being the 8th largest stock in the S&P 500, its institutional ownership remains below market weight.
Broadcom’s 43% free cash flow is second only to Nvidia in the semiconductor sector, and it boasts a leading combination of 15% annual dividend growth and a 1.25% dividend yield. Potential risks include shifts in AI sentiment, customer concentration, rising competition from Nvidia, and its significant $60 billion net debt.
