Goldman says Broadcom earnings were just a hiccup and to buy the dip

Goldman Sachs said investors shouldn’t pull the plug on Broadcom after its latest earnings report. Analyst Toshiya Hari reiterated a buy rating on the semiconductor and infrastructure software supplier on Friday. Hari’s $190 price target implies shares can rally 24% from Thursday’s closing level. Hari’s call comes one day after Broadcom posted fiscal third-quarter earnings that beat analyst estimates for both revenue and earnings. But Broadcom also said revenue in the current quarter should come in at about $14 billion, a touch below the consensus estimate of $14.11 billion, based on analysts polled by FactSet. The Goldman analyst also noted that revenue from Broadcom’s semiconductor solutions business came in below analyst expectations in the third quarter. However, Hari said challenges tied to artificial intelligence-related revenue should be seen as simply a “near-term hiccup.” “In the near-term, post this quarter’s hiccup, we envision a re-acceleration in the AI Semiconductor business coupled with a cyclical recovery in the non-AI revenue stream … putting the company back on a beat and raise cadence,” Hari told clients in a report. Despite the tepid forward guidance and AI-related performance, Hari said Goldman still is confident in its long-term investment thesis, for the following reasons: Broadcom’s xompetitive position in the high-speed networking and custom compute business An “industry-leading” profile for profit margins and returns Consistent free cash flow generation and a focus on returning capital to shareholders. Still, shares tumbled more than 9% in early trading on Friday as investors studdied the earnings report. That marks a turnaround from what has been a strong year, with Broadcom surging nearly 37% in 2024. AVGO YTD mountain Broadcom, year to date