Broadcom rose more than 16% intraday! Bank of America is optimistic about entering the "trillion-dollar club", with the stock price expected to rise by double digits

AI hot stock Broadcom previously announced its financial report, showing that its performance in the second quarter greatly exceeded expectations and raised its full-year performance guidance. Bank of America reiterated its buy rating on Broadcom on Thursday, stating that the company is expected to enter the "trillion-dollar club." Broadcom's stock price surged by 15% at one point on Thursday.

Bank of America raised Broadcom's target stock price from $1680 to $2000 on Thursday, which means it is nearly 34% higher than the closing price of $1495.51 on Wednesday.

Broadcom's current market value is approximately $693 billion. If it surpasses the $1 trillion mark, Broadcom will be on par with companies like Microsoft, Apple, Nvidia, Alphabet, Amazon, and Meta Platforms, entering the "trillion-dollar club."

Analysts at the bank believe that Broadcom's stable semiconductor sales and its exposure in multiple long-term product cycles may help it achieve this goal.

Broadcom's strong performance in the second quarter exceeded Wall Street's expectations. Broadcom also announced a 10-for-1 stock split effective on July 15. Analysts believe that splitting expensive stocks is often a positive signal for stock performance. Bank of America stated that the average return of companies announcing stock splits is 25% in the year following the split, significantly higher than the S&P 500 index's average return of 12%.

On Thursday, Broadcom's stock price hit a new daily high of $1735.85 at the opening, rising nearly 16.1% intraday, and maintained an increase of over 10%, poised to continue setting new closing highs. Year-to-date, Broadcom's stock price has risen by approximately 34%.

The new target price set by Bank of America analysts envisions the stock trading at the high end of its historical range and at a premium level compared to some peers. Analysts state that this premium is "reasonable, as Broadcom's earnings per share (EPS) growth reaches double digits, and it demonstrates the best profitability, free cash flow generation, and return on investment in the semiconductor industry."

Analysts point out that the demand for Broadcom chips is not limited to the artificial intelligence field, and the company has taken steps to repay its debt.

"We rate Broadcom as a buy because of its high-quality diversified exposure in long-term product cycles in the smartphone, cloud data center, telecom, and enterprise storage markets. Additionally, Broadcom's EBITDA and free cash flow (FCF) profit margins exceed 45%, making it one of the most profitable semiconductor companies, expected to continue driving strong cash returns."

In addition to Bank of America, more than a dozen financial institutions have also raised Broadcom's target price.

Broadcom currently trades at a price-to-earnings ratio of about 28 times expected earnings, while Nvidia and competitor Marvell Technology have price-to-earnings ratios of about 40 times Morningstar analysts said, "We continue to believe that Broadcom is in a very favorable position to benefit from long-term growth in generative artificial intelligence investments."

GraniteShares holds Broadcom stocks through ETFs, and the company's Chief Revenue Officer Paul Marino said, "After this stunning financial report and the announcement of a 10-for-1 stock split, if you don't own Broadcom stock, there is a huge gap in your investment portfolio."