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Broadcom (AVGO, Financial) shares rose 1% on Monday after Citi analysts, led by Christopher Danely, reaffirmed their Buy rating and $220 price target for Broadcom. Despite the fears over possible regulatory actions that might hamper the export of AI chips to China, Broadcom is up on Monday. Such measures are reportedly being considered by the Biden Administration to affect the third largest ASIC customer of Broadcom, Bytedance.
About 3%- 5% of Broadcom's estimated revenue for fiscal 2025, $2-$3 billion, comes from Bytedance. The challenge in forecasting U.S. government policy came up, but analysts also highlighted Broadcom's diversified AI business, which might recoup lost revenue.
This is in line with Broadcom's strong financial performance, according to Citi's optimism. According to 12 months of data, the company posted a 44% revenue jump to $51.57 billion alongside a rock solid 75.2% gross profit margin. In addition, 20 analysts in the past month increased their profit estimates for Broadcom, with the price goals ranging from $171.60 to $300, indicating optimism in its path to growth.
As the AI market expands, the semiconductor giant, one of the big boys offering AI and infrastructure software solutions, continues to be a major player. The risks associated with individual customers such as Bytedance could be mitigated by the demand across the AI services segment, added Citi analysts.
This article first appeared on GuruFocus.