What happened
Shares of semiconductor design giant Broadcom (AVGO -4.31%) were up 4% today at market close, pushing the stock to new all-time highs as the market overall was digesting early research that the omicron coronavirus variant will perhaps be less severe than the delta variant.
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But that's not the whole story for Broadcom. Credit Suisse analyst John Pitzer maintained an outperform rating on the stock, but raised the one-year price target to $620 (previously $580) -- implying a 5% increase from current trading levels.
So what
Take short-term price targets in stride. All individual stocks, even slower-growing but stable behemoths like Broadcom, are volatile in nature and can swing up and down from day to day and month to month. Broadcom is a case in point. Shares of the company are up 34% in 2021 alone, with just weeks to go until the new year.
The catalyst for the run higher has been Broadcom's highly profitable enterprise. Though sales were up only 15% through the first nine months of the current fiscal year, the company's adjusted net income was up 27% to $9.08 million -- good for an enviable adjusted net income profit margin of 45%. With supply chains still constrained and demand for chips greater than ever, Wall Street thinks Broadcom's steady growth but booming bottom line will continue.
Now what
Broadcom will get to prove analysts right or wrong when it reports on its fourth quarter of fiscal 2021 (for the 12 months ended in October 2021) this Thursday. For the record, consensus analyst opinion thinks revenue will be $7.36 billion (implying year-over-year growth of 14%), and for adjusted earnings per share to be $7.77 (up 22% year over year).
As of this writing, the semiconductor stock trades for 19 times trailing-12-month free cash flow and pays a 2.6% yielding dividend. But chip demand for use in mobile devices, data centers, vehicles, and more continues to proliferate. Barring an unexpected development this Thursday during the earnings update, Broadcom is a great long-term bet for investors looking for broad-based exposure to the industry.
