The recent financial results of Broadcom Inc (AVGO), a semiconductor maker, have stirred up quite a buzz in the market. The company reported robust revenue and free cash flow numbers for its fiscal Q3, as well as provided strong guidance for the upcoming quarter. Despite this positive news, AVGO stock experienced a dip, raising questions about its true value. Let’s dive deeper into the numbers to uncover the hidden potential in AVGO shares.
Strong Free Cash Flow (FCF) Results
For the quarter ending Aug. 4, Broadcom’s revenue exceeded expectations, reaching $13.07 billion. The real showstopper, however, was the record-breaking free cash flow (FCF) of $4.791 billion, showcasing a 4.2% increase from the previous year’s Q3. Although the FCF margin dipped slightly compared to last year, hovering around 36.65%, it still stands as a solid performance metric for the company. Management’s optimistic revenue guidance further reinforces the growth potential for Broadcom moving forward.
Target Price Estimate
An analysis of AVGO stock’s value based on FCF yield metrics suggests an undervaluation in the market. With potential growth in FCF, projections point to a market cap that could be 40% higher than the current valuation, setting a price target of $191.80 per share. Even with a conservative FCF yield estimate of 2.90%, the minimum price target is set at $165.22 per share – still reflecting a significant upside from the current trading price.
Analysts See AVGO Stock as Undervalued
Market analysts echo the sentiment that AVGO stock is undervalued. Average price targets from various sources indicate a considerable upside potential for the stock. Recent adjustments to price targets by top analysts further support the notion of hidden value in AVGO shares. With experts raising their outlook on the stock post-earnings, there seems to be a consensus that Broadcom stock is being underestimated by the market.
