Why Broadcom Was Rallying Again Today

Shares of Broadcom (NASDAQ: AVGO) rallied 5.3% on Monday, as of 1:18 p.m. ET.

Broadcom received a bullish note and price target upgrade from a Wall Street sell-side analyst today, building upon the blowout 2027 guidance management gave on the company's recent earnings call.

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UBS ups its target to $270

On Monday, UBS analyst Timothy Arcuri raised his target on Broadcom from $220 to $270 per share, while maintaining his bullish stance on the name.

Broadcom's stock had recently hit Arcuri's price target, which usually prompts an analyst to either downgrade the stock based on valuation or readjust their price target higher. Arcuri chose the latter, saying, "After reviewing Broadcom's serviceable-addressable-market disclosures and reassessing likely outcomes for its custom compute and AI-networking businesses, we are raising our AI revenue estimates."

Arcuri's team specifically raised their 2026 earnings per share (EPS) estimates on Broadcom by 20%, but perhaps more importantly, raised their 2027 EPS estimates by a whopping 40%. Arcuri likely had Broadcom's artificial intelligence (AI)-related revenue decelerating in those out years after tremendous growth in 2024 and likely in 2025. This is because as a business grows larger, it's harder to post very high growth rates due to the law of large numbers.

However, Broadcom guided to a stunning $60 billion to $90 billion in AI-related revenues in 2027, up from just $12.2 billion in its recently completed fiscal 2024. That seemed to indicate the AI transition will mean higher growth rates for longer than many might have imagined.

"Could be conservative"?

Arcuri noted that his estimates "could be conservative" if Broadcom lands more customers for its custom ASIC (applications-specific integrated chip) segment, which builds parts of AI ASICs designed by large tech companies. In recent days, one tech publication pointed to Apple potentially working with Broadcom on a custom server chip named Baltra for Apple Intelligence workloads. If that comes to pass, the 2027 $60 billion to $90 billion addressable market could expand significantly.

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Billy Duberstein and/or his clients has positions in Apple and Broadcom. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.