Monthly surge of 40% for this Stock-Split Share leaves question: Is it still opportune to invest?
Broadcom's stock closing out 2024 like a boss, with a jaw-dropping surge in December, has got everyone talking. It's even more impressive when you consider it was already worth a whopping $800 billion before this touchdown. Now, it's earned a coveted spot in the prestigious $1 trillion club.
But, the question on everyone's lips is: Can it keep up the momentum into 2025? After all, the hype was all about the management's optimistic outlook for 2025.
Broadcom's business reaches far and wide, from connectivity switches in data centers to cybersecurity software, and even dipping its toes in AI accelerators. This diversified portfolio is impressive, with some parts growing organically, and others, like the acquisition of virtualization software specialist VMware, coming in through strategic mergers and acquisitions.
The VMware purchase gave a boost to Broadcom's revenue growth, pushing it up by a staggering 51% in Q4 2024. But, let's not forget that it was only only 11% organic growth when you strip out the impact of VMware. And, there are some concerns about its long-term viability, with companies like AT&T even taking legal action due to the massive price hikes after the acquisition.
Despite these concerns, Broadcom's stock saw a 40% surge following its Q4 earnings report. But, is it all thanks to its AI product line? Or, is it too expensive compared to its expected growth?
Broadcom's AI-related revenue has played a significant role in its growth, driving an impressive 158% year-over-year revenue growth in its networking division. And management is expecting this growth to continue into 2025. But, with only an 11% organic growth, some might question whether it was warranted.
Broadcom's valuation of 36.6 times forward earnings is a clear indicator that the stock is pricey. The latest AI hype could have pushed the stock higher, but the growth of its other product lines isn't nearly as rapid as its AI offerings.
So, are there better options for AI investments out there? TAIwan Semiconductor Manufacturing, a company that manufactures chips for Nvidia GPUs and Broadcom's own products, is projected to grow its top line by an impressive 26% in 2025 and trades at a more palatable 23 times forward earnings.
While Broadcom's AI growth is impressive, its stock is currently too expensive for a comfortable buy. There are other, more affordable options out there that are growing faster and have a stronger growth trajectory.
- With Broadcom's impressive earnings in 2024, investors are considering if they should diversify their investing in finance, particularly in tech companies like Broadcom, for 2023, given its split and accelerated growth in AI products.
- Broadcom's strategic investments in areas like AI accelerators have significantly contributed to its financial growth, as seen in its Q4 2024 revenue surge of 158% in the networking division, but some analysts question if its current valuation of 36.6 times forward earnings is justified.
- As Broadcom continues its investment in AI, the company is expected to see continued growth into 2025, but some investors are looking at other more affordable options like Taiwan Semiconductor Manufacturing, which is projected to grow at a faster pace while trading at a more reasonable valuation of 23 times forward earnings.
- With Broadcom's impressive financial performance and optimistic outlook for 2025, investors might consider this as a promising opportunity to invest in the finance sector, particularly in tech companies, and take advantage of its potential growth, but they should also carefully evaluate the company's valuations and consider more affordable alternatives with a stronger growth trajectory.
