Shares of chipmaker Broadcom (AVGO) fell 4.2% on Jan. 14 as investors digested a series of headwinds. Reports of a Chinese directive against US software, a multibillion-dollar debt offering and major domestic stock sales converged, briefly denting sentiment and compressing near-term sentiment.
Wells Fargo analysts see the pullback as an opening rather than a warning. Led by analyst Aaron Rakers, they argue that the growing visibility of significant incremental catalysts through 2026 warrants a more constructive stance, especially as Broadcom deepens its strategic relevance through a high-profile partnership with Alphabet (GOOGL) on tensor processing units.
Based on that view, analysts upgraded Broadcom from “Equal Weight” to “Overweight.” Wells Fargo also significantly raised its estimates for calendar 2026 and 2027. For 2026, the firm raised projections from $97 billion and $10.36 per share to $100.3 billion and $10.80. For 2027, analysts raised their projections from $130.5 billion and $13.90 to $143.8 billion and $15.35.
These upward revisions are directly based on the acceleration of artificial intelligence (AI) momentum. Wells Fargo now expects Broadcom’s AI semiconductor revenue to reach $52.6 billion in 2026 and $93.4 billion in 2027. That implies year-over-year growth of 116% and 78%, respectively, as demand for AI increases.
With AVGO shares down about 1% over the past three months, the setup invites investors to evaluate whether the current pullback offers an attractive entry point or if optimism has already made its way into the share price. Let’s take a closer look.
Broadcom, headquartered in Palo Alto, California, is among the largest semiconductor companies in the world. It designs, develops and supplies semiconductors, enterprise software and security solutions, positioning itself as a hardware powerhouse and software-scale player.
With a market capitalization of $1.66 trillion, Broadcom offers RF devices, wireless connectivity, custom touch controllers and inductive charging for mobile applications. It also provides cloud tools, application development platforms, perimeter networks, mainframe software, and cybersecurity offerings.
Performance trends underline strength. AVGO stock is up 53% over the past year and has advanced about 25% in the past six months. By comparison, the State Street Technology Select Sector ETF SPDR (XLK) has gained 26% over the past 52 weeks and 13% over six months, highlighting Broadcom’s relative outperformance.
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AVGO stock currently trades at 40.8 times forward adjusted earnings and 25.5 times sales. Both beat industry benchmarks and the company’s own five-year averages, indicating considerable valuation.
Additionally, Broadcom has increased its dividend for 15 consecutive years and pays $2.60 per share annually, for a yield of 0.76%. Its most recent dividend of $0.65 per share was paid on December 31 to shareholders of record as of December 22, reinforcing disciplined capital returns.
On December 11, Broadcom made decisive progress in the fourth quarter of fiscal 2025. Revenue grew 28% year-over-year to $18.02 billion, also surpassing Street forecasts of $17.5 billion. Adjusted EPS grew 37% year-over-year to $1.95, also beating Wall Street expectations of $1.87.
Profitability followed suit. Non-GAAP operating income increased 35% to $11.9 billion, while non-GAAP net income increased 39% to $9.7 billion. AI semiconductor revenue increased 74%, well above company forecasts, underscoring the strength of demand and execution discipline in advanced workloads.
The infrastructure software also impressed. Sales in VMware’s home segment increased 19%, accelerating from the previous quarter. The momentum suggests Broadcom continues to expand VMware successfully, even as some customers express frustration, reinforcing confidence in the integration strategy.
On the balance sheet, cash and cash equivalents reached $16.2 billion at the end of the quarter, up from $10.7 billion in the previous quarter.
Looking ahead, Broadcom expects AI semiconductor revenue to double year-over-year to $8.2 billion in the first quarter of fiscal 2026. Management also forecasts total revenue of $19.1 billion and adjusted EBITDA margins of 67%, indicating confidence in both growth and profitability entering the new fiscal year.
Analysts model a continued acceleration in earnings. Consensus forecasts call for Q1 FY2026 EPS of $1.66, up nearly 19% year over year. Full-year 2026 earnings are projected to rise 49% to $8.39, followed by another 46% increase to $12.23 in fiscal 2027.
All that said, Wells Fargo analysts have raised Broadcom’s price target to $430 from $410, reflecting growing confidence in execution and visibility. Meanwhile, Mizuho analyst Vijay Rakesh maintained an “outperform” rating and raised his price target from $450 to $480, reinforcing bullish sentiment.
Overall, Wall Street has given AVGO stock a “Strong Buy” consensus rating. Of 42 analysts covering the stock, 36 recommend a “Strong Buy”, three suggest a “Moderate Buy” and three recommend a “Hold” rating.
AVGO stock’s average price target of $455.22 implies a potential upside of 29%. Meanwhile, the street’s high target of $535 represents a potential gain of 52% from current levels.
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On the date of publication, Aanchal Sugandh had no (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
