The semiconductor sector remains in focus this week as Broadcom (AVGO) will report its third quarter earnings after the closing bell on Thursday. Bernstein senior analyst Stacy Rasgon joins Catalysts to break down his call on Broadcom and what investors will be looking for in the company’s earnings report.
Rasgon has an Outperform rating on Broadcom, arguing that the company has “the second-best AI story in the space.” He highlights how Broadcom designs chips for hyperscalers like Google (GOOG, GOOGL) and Meta (META), and believes that its AI guidance this year has been “reasonably conservative.” However, Broadcom’s core business has struggled this year, which Rasgon attributes to a cyclical low hitting the chip industry.
He points to Broadcom’s software business, VMWare, as a catalyst for the company within the next year. “I think there’s good upside on the software. Even if you just look more broadly, I would say it’s got some of the best operating metrics, margins, and free cash, and everything else in the space by a mile. And it’s still very inexpensive. It’s at a pretty sharp discount to the broader semiconductor space.
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