This Is Probably The Best Chip Stock You Missed. Here’s Why It’s Not Too Late to Buy.

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This Is Probably The Best Chip Stock You Missed. Here’s Why It’s Not Too Late to Buy.

The rise of Broadcom (NASDAQ: AVGO) seemed to come out of nowhere. Amid the stock’s rise, Broadcom’s market cap now exceeds $800 billion, making it the 11th-largest company trading on the U.S. market.

Still, this is not among the top stocks in the

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and software industries, as the average consumer has little direct contact with its products. Hence, the question for investors is how they might have missed this stock and whether it is too late to capitalize on its growth.

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Investors should understand that next to ASML, Broadcom is probably one of the ******* semiconductor stocks to notice.

For one, it exclusively targets other businesses as customers throughout its history. It succeeded by employing engineers near the headquarters of its customers. This allowed it to collaboratively develop chips that met its customer’s needs. But while products such as the Wi-Fi hotspot on Apple’s iPhone made it into the consumer space, most of this happened away from the eyes of investors.

Moreover, it expanded into infrastructure software beginning in 2018. This insulated the company from the cyclical nature of the chip industry while allowing it to offer combined hardware and software applications.

Additionally, this infrastructure software segment received a tremendous boost after Broadcom acquired VMWare in 2023. Consequently, it now constitutes 44% of the company’s total revenue.

However, like on the hardware side, it serves business customers. Thus, it was easy to escape the notice of investors not directly involved in the tech industry.

The other factor was the name changes. The company began as Avago Technologies. The Broadcom name may sound familiar because it was the moniker of a company that made chips for wireless and broadband applications. Avago bought this company in 2016 and adopted the Broadcom name.

Investors who don’t own Broadcom stock have missed out on a reliable dividend. Its payout has risen every year since 2010. Its annual payout of $2.12 per share has a

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of 1.2%, below the S&P 500’s yield of 1.25%. Still, it has risen by double digits annually almost every year of the company’s existence, making it a significant portion of the total returns for long-term investors.

Moreover, the 280% increase in Broadcom stock over the last two years took a toll on dividend yields. Its recovery from the 2022 bear market accelerated in early 2023 as its role in generative AI became more apparent.

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The financial growth reflected this. The nearly $38 billion in revenue in the first three quarters of fiscal 2024 rose 42% from year-ago levels.

Still, instead of booking those revenue increases as profits, Broadcom used that money to amortize intangible assets, make acquisitions, and invest in research. Thus, the $1.6 billion in net income for the first nine months of 2024 was well below the nearly $11 billion during the same ******* in 2023.

For this reason, the P/E ratio may not accurately reflect the valuation, and the price-to-sales (P/S) ratio of 17 may give some investors pause. Nonetheless, the forecast profit growth is expected to take the forward P/E ratio to 36, indicating that investors could continue to bid its stock price higher over time.

Despite appearances, it is not too late for investors to profit from the rise of Broadcom stock.

Indeed, its rise, particularly before the current decade, escaped the attention of most investors, particularly those focused on the consumer market.

However, its size and rapid growth have made it next to impossible to ignore. And despite its growth, the valuation measures indicate Broadcom has more room to grow. This should hold investors in good stead, even if those who choose to buy in the current investment climate.

Before you buy stock in Broadcom, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 

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for investors to buy now… and Broadcom wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $853,860!*

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*Stock Advisor returns as of October 28, 2024

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has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Apple. The Motley Fool recommends Broadcom. The Motley Fool has a

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was originally published by The Motley Fool

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#Chip #Stock #Missed #Heres #Late #Buy

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