Our PT of $415.00, or 36X F27E EPS, is towards the high end of its recent trading range of 35-47X due to our expectation of upside to Consensus estimates driven by its AI business and recent multiple expansion across the peer group. We would cite semi investing Rule #1 – Do not buy or sell based on valuation.

We see the following key risks to our target price:


Customer: Broadcom derives ~20% of sales from its largest customer, Apple. Therefore, any major uptick/downtick in demand for Apple’s products could result in upside/downside to our estimates and rating for Broadcom.


SG&A target: Broadcom's long-term SG&A target is <3% of revenue (excluding stock-based compensation), one of the lowest among semi peers. However, if Broadcom is unable to reach its SG&A target, it could result in downside to our estimates and rating for Broadcom.


Competition: Any fluctuations in market share between Broadcom and its competitors could result in upside/downside risk to our estimates.


M&A: If Broadcom pursues further acquisitions, it could lead to margin/EPS accretion/dilution and result in upside/downside to our estimates.


If the impact on the company from any of these factors proves to be greater than we anticipate, the stock will likely have difficulty achieving our target price. However, should they be less than anticipated, the stock could trade above our target price.