Why do I say that Broadcom at $410 today will most likely look like a gift when we look back six months from now?
Let’s do the math.
After the selloff, Broadcom was trading at around $410, with nearly $380 billion in market value wiped out.
Based on annualized Q2 profit, its P/E is roughly 20x. This is a company whose AI chip revenue grew 143%, whose next-quarter guidance points to 200%+ growth, and whose free cash flow just broke above $10 billion. A 20x P/E.
If we calculate based on 50% profit growth by Q4 year-end, the forward P/E by the end of the year would be only in the teens.
Broadcom trading at a P/E in the teens. When was the last time you saw that number?
Its six core custom chip customers include Google, Meta, Anthropic, and OpenAI, all trillion-dollar-level AI giants.
Q3 AI chip revenue guidance is $16 billion. If delivered, Broadcom’s AI revenue in a single quarter would exceed the full-year revenue of most semiconductor companies.
The market is too sensitive right now. If a company does not make analysts scream with surprise when earnings are released, it gets punished hard.
But a mispriced selloff is still a mispriced selloff. The fundamentals have not changed, while the valuation has become cheaper.
Of course, if you had no position before, I do not suggest rushing in today to catch a falling knife. Wait two or three days for the emotion to digest, then see where it stabilizes before considering a position.
A mispriced stock does not punish you for buying two days late. What hurts is rushing in during peak panic and then taking another round of momentum selling.
That is the state of the US market now. Good earnings are not enough. They have to be breathtakingly good. Broadcom’s mistake was being excellent, but not perfect.
But buying excellent companies when they are mistakenly sold off has always been one of the best trades.
Risk note: This article is a community opinion summary and does not constitute investment advice. DYOR.
Original author: Bean哥
X: @BroBean88
Original post: https://x.com/BroBean88/status/2062577439512109232?s=20