AVGO Stock: VMware Deal Closing Lifts Broadcom Uncertainty


Broadcom (AVGO) stock is poised to move higher now that the chipmaker has completed its purchase of VMware, Wall Street analysts say. AVGO edged higher in premarket trades on Friday.


San Jose, Calif.-based Broadcom closed its acquisition of VMware on Wednesday after receiving conditional approval from China’s State Administration for Market Regulation. Broadcom announced the deal in May 2022 but it was held up by a protracted review by Chinese regulators.

Broadcom is an diversified technology company that sells semiconductors and infrastructure software solutions. Palo Alto, Calif.-based VMware provides cloud computing management and networking software.

KeyBanc Capital Markets analyst John Vinh reiterated his overweight rating on AVGO stock and raised his price target to 1,200 from 1,000.

In premarket trades on the stock market today, AVGO stock advanced 0.5% to 976.60.

In a note to clients on Wednesday, Vinh said he expects the acquisition to be immediately accretive to Broadcom’s gross profit margin and earnings per share.

AVGO Stock Is Tech Leader

On Oct. 13, AVGO stock hit a buy point of 923.67 out of a flat base, according to IBD MarketSmith charts. But it pulled back, ending that session down 2.5% to 883.18. That action marked its third failed breakout in four months.

Still, Broadcom stock recovered and notched a record high of 999.87 on Monday.

Further, AVGO stock is on the IBD Tech Leaders list.

VMware Acquisition Worth $83 Billion

The VMware acquisition will increase Broadcom’s software sales and lower its exposure to the cyclical semiconductor market, Vinh said.

Broadcom’s software sales will increase to about 40% of its total revenue in year one post-close, Evercore ISI analyst Matthew Prisco said in a client note. That’s up from 20% before the acquisition, he said.

Prisco rates AVGO stock as outperform with a price target of 1,050.

When Broadcom announced its acquisition of VMware 18 months ago, the cash-and-stock deal was valued at $61 billion, plus assumption of VMware’s debt of about $8 billion. But given the appreciation of Broadcom’s stock since then, the closing value of the deal was about $83 billion, Barron’s reported.

In a news release, Broadcom Chief Executive Hock Tan called the acquisition of VMware “another important step forward in building the world’s leading infrastructure technology company.”

The next potential catalyst for AVGO stock could be Broadcom’s fiscal fourth-quarter earnings report on Dec. 7.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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