We're Adding a Brand New Name to the Bullpen
Here's why we want to keep close tabs on this tech stock.
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* While there is ample overlap with our chip holdings, we’re adding Broadcom to the Bullpen.
* Broadcom’s results bring confirmation for our positions in Apple, Marvell, Qualcomm, Nvidia and Universal Display.
Broadcom’s Results Bring Confirmation for Several Holdings
As you know, one of our methods is to pay close attention to competitors, customers, and suppliers for our holdings and given its end-market mix, and Broadcom AVGO certainly falls into that basket. Let’s run through last night’s quarterly results from Broadcom.
The company’s networking revenue grew 43% year over year, benefiting from strong AI demand and Broadcom sees that continuing. That led the team to up its 2024 AI revenue guidance to $12 billion from $11 billion. Outside of AI, much like Marvell Technology MRVL, Broadcom called the bottom in that part of its networking business and also sees a continued recovery for its enterprise infrastructure business. Those comments add some nice backing for our thinking on Marvell, and the lifted AI revenue guidance does the same for our Nvidia NVDA position.
Turning to Broadcom’s wireless business, while it only grew 1% year over year, the sequential guidance is for more than 20% growth due to the launch of next-generation devices. We see that as code speak for iPhone given Apple AAPL was roughly 20% of Broadcom’s revenue stream last year. We see this as another layer of support for our shares of Apple, Qualcomm QCOM and Universal Display OLED.
Adding AVGO to the Bullpen
That’s the good news. The not-so-good news is that like other companies we’ve seen report in recent weeks, Broadcom’s revenue guidance of $14.0 billion for the current quarter came up short of the $14.11 billion consensus. In our view, seeing a stock trade off hard on such a tiny shortfall is a symptom of the market we’re in. While we have ample chip exposure through our positions in QCOM, NVDA, and MRVL, we will want to keep close tabs on AVGO, and for that reason, we’ll place the shares in the Bullpen.
As we do this, we’d remind you that just because a stock is added to the Bullpen does not guarantee it will graduate to the portfolio. Factors that will decide if a Bullpen resident is lifted to the Portfolio hinge on the strength of its end markets, EPS growth prospects, valuation, overall risk-to-reward trade-off, and technical setup.
More Pro Portfolio:
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At the time of publication, TheStreet Pro Portfolio was long MRVL, NVDA, QCOM, AAPL and OLED.
