Broadcom: Business Quality Is High, But Overvalued
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Florian Muller1.1K FollowersFollow5ShareSavePlay(9min)CommentsSummaryBroadcom experienced an 11% single-day drop, but unlike Oracle, this is not driven by fundamental concerns.AVGO's fundamentals remain robust, with strong cash flow conversion and manageable debt, distinguishing it from some peers facing structural challenges.The core issue for AVGO is valuation. The stock rallied 55% YTD on multiple expansion, leaving no margin for minor disappointments.I rate AVGO as a neutral Hold: business quality is high, but the current valuation is difficult to justify with reasonable terminal growth assumptions and discount rates. J Studios/DigitalVision via Getty Images When a blue-chip mega-cap stock like Broadcom (AVGO) (AVGO:CA) drops more than 11% in a single day, it catches a lot of attention, and rightfully so. Although Broadcom is highly volatile in and of itself, withThis article was written byFlorian Muller1.1K FollowersFollowExcellent academic Finance background and Finance professional with over five years of cumulative experience in Consulting & Audit Firms including a professional Valuation position, FP&A and Controlling positions, and Financial writing.My approach is mostly value-oriented. However, valuation is rarely an appropriate short- to mid-term timing indicator, but rather hints at long-term chances or risks. In my pieces, I assign the written word and data presented more value than a simple rating and might often rate hold/neutral, even when my inclination is bullish or bearish. Rating systems do not consider time horizons or investment strategies. My articles aim to inform, not to make decisions.Analyst’s Disclosure:I/we have a beneficial long position in the shares of NVDA either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Recommended For You