Time To Buy The Dip on Broadcom? | Broadcom (AVGO) Stock Analysis! |

Broadcom stock is currently in the midst of a slight dip. Now, over the last 5 years, this is a stock that's still up over 600%. But if we look at the performance relative to the S&P 500 year to date, it's underperforming. It's only up by about 3.2%. And it's interesting because while the S&P 500 has indeed been volatile this year, relative to the volatility of Broadcom, it looks like pretty much nothing. We can see Broadcom at one point was down 15% this year, surged and was up 40% this year, and as of right now, up about 3.2%. Now, Broadcom has been a stock that I held in my portfolio for a long time now. On my original cost basis, I'm up over 600% and I've continued to add new shares over the years. And even with my cost basis going higher, as I've added new shares, I'm up close to 200% on this position. So, it's one of the larger positions in my portfolio. I've done very well with it, but with the sell-off after the recent earnings report, is Broadcom a structurally weaker company? Has the thesis changed? And what does the valuation look like at current prices? We need to answer all these questions in today's video. But before we dive in, I have a very exciting update. The software I've been using to analyze stocks and spreadsheets for years now is Ticker Data. It allows you to automatically import stock financials directly into your spreadsheet. Like this, for example. You can see all the data automatically loads in. With the ticker data function, you can easily automate importing really any financials you want directly into your spreadsheet. And this allows you to build portfolio trackers or valuation models and watch lists that completely fit your needs. Or you can simply use the over 20 plus premium sheets that are ready to go from the ticker data website and are completely automated. 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And you can see this data will automatically load in. On top of this, you can search for symbols from essentially all the exchanges we provide data on. So whether you're wanting to look at crypto, Indian stocks, or simply can't remember the ticker for the stock you're looking at, you can quickly find it. And you can also browse all of the attributes that you want in one simple place. So this is a huge update for ticker data. So to celebrate, you can currently get 30% off the annual plans by using code heat at checkout. So let's go ahead and dive into Broadcom now. Now again, over the last month, we've seen it start to decline, down 6% and at one point this year, this was a stock trading at $480 a share. Now, what we have to understand from a valuation perspective is when we look at the next 12 months, the forward-looking PE multiple, Broadcom now sits at just a 20.6 PE multiple, which is substantially lower than what we've seen throughout the last year. At one point, they traded at a Ford PE multiple of 49 times earnings. So, a 20.6 PE multiple looks extremely reasonable for Broadcom. That's absolutely true, but it also doesn't paint the entirety of the story. Keep in mind when we look at the trailing 12-month PE multiple, it's trading at about 45.59. Now, that's a number that scares a lot of people at first glance. So, what does this tell us? Well, it tells us Broadcom is trading at quite a premium, but the reason is because it's growing earnings at a substantial rate. For example, jump over to our sensitivity analysis and take a look at Broadcom and look at the earnings growth. One of the cool features of ticker data is you can automatically import the average estimated earnings per share from analysts through the year 2030. right now and we can see the projected EPS kagger through 2030 is about 32%. In 2026 it's projected to more than double. 2027 another 67% year of growth. So the simple reality of Broadcom right now is if they're able to achieve this level of earnings growth they're trading at a very reasonable valuation multiple. That's a simple fact. So what's the reason for the selloff? Well, let's take a look at the recent earnings report. The first thing we'll notice, Q3 non-GAAP earnings per share of $3.32 was a beat by 8, while revenue of 29.59 billion, up 85.5% year-over-year, was a beat by 160 million. Now, reporting beats on top and bottom line certainly isn't anything new for Broadcom. In fact, if you look at the earnings history for this stock, you can see they've beaten EPS estimates for four consecutive quarters in a row now, with this being one of the larger beats that they've posted. And after this recent quarter, Broadcom has now produced 31.9 billion in free cash flow through the first nine months of 2026. Now, for reference, take a look at the dividend breakdown sheet. In 2025, Broadcom produced 26.9 billion of free cash flow. So, just through three quarters, Broadcom has already generated more free cash flow than in all of 2025, which already saw a massive bump in growth from 2024. Now, of course, as a side note, this is what's allowing Broadcom to grow their dividend at such a substantial rate. The 10-year dividend cagger is sitting at about 26%. They went from paying 16 cents per share back in 2015 to 242 in 2025. So, again, what's the reason for the sell-off? Well, if we scroll down, you can see it essentially in one simple statement. Fourth quarter revenue guidance of approximately 34.8 billion versus the previous consensus of 35 billion. So, we're talking about a very slight reduction in the overall fourth quarter 2026 outlook. That's the reason for the sell-off. Now, there's definitely a level of irony in this because if you include the fact that they beat earnings expectations every single quarter in 2026, essentially for the full year, they're going to beat their guidance still. So, again, there's definitely a level of irony due to the fact the stock is selling off just because of a slight reduction in the fourth quarter guidance. Now on top of this if we dive deeper into the earnings report they also reported revenue of 29.6 billion for the third quarter which is up 86% from the prior year period. So again if we just look at the profitability and income sheet and look at Broadcom keep in mind revenue in 2025 alone was about 63.8 billion. So for reference just through the first three quarters Broadcom is already at 71.1 billion. And not only that, take a look at the margin expansion they've seen over the last decade. In 2016, had a 44.8% gross profit ratio last year coming in at 67.7%. This is what leads to explosive earnings growth. When you're growing revenue at 25% kagger and margins are going from around 44 all the way up to 67, you're going to get mind-blowing results. Now, with that being said, keep in mind over the last decade, really over the last 20 years, a lot of the growth from Broadcom has been through acquisitions. Now, whether or not that's a good thing depends on a multitude of factors. Obviously, it depends on the success of these acquisitions. And in short, this has gone very well for Broadcom and ultimately now they have two primary revenue segments. They have semiconductor solutions and infrastructure software. Both of them have their pros and potentially cons. Now, infrastructure software is a much smaller portion of the overall business. However, it almost adds a recurring revenue layer to the overall business, which I think is very attractive. Everyone loves predictable cash flows, and that's exactly what this business segment provides. Now, semiconductor solutions is the one everyone focuses on right now because the growth rates are just absolutely absurd. AI semiconductor revenue was up 221% year-over-year in the recent quarter. If we look at the overall growth in semiconductor solutions as a whole year-over-year, it was up 127%. Meanwhile, Infrastructure Software was up 29% year-over-year, which again is quite strong growth. So, ultimately, I didn't see anything in this earnings report as I dove through it that led to me growing more concerned. In fact, something was stated that led to the complete opposite feeling. It's interesting how Wall Street seems to be selling off Broadcom slightly because of the slight reduction in fourth quarter guidance. But take a close look at this statement from CEO Hawkan. This is perhaps the most important takeaway from the entirety of the earnings report. During the earnings call, Hawkan pointed out a multiple things talking about how they have large demand from companies like Anthropic and Google, pointing out how they're working with Open AI. He pointed out how in Q4 they expect both XPUs and AI networking revenue to triple year on year. He stated how their engagement with Google has never been stronger. And he also stated how he believes they have the strongest IP portfolio in semiconductor design. This is all great things you want to hear, but I'm a very fundamental person. What does this mean for the fundamentals? Well, here's the key statement that everyone seems to be overlooking. As he goes through all these things that are going on with the company, he states, "As a result, I got to say we are very much on target to exceed $30 in earnings per share in fiscal 2028." $30 in EPS 2028. Now, here's what's interesting about this. When we jump back over to the sensitivity analysis model, right now, the average analyst estimate has 2028 EPS sitting at about $2827. Meanwhile, the CEO is stating that he's very confident that they can get to $30 in EPS by 2028. What does the valuation look like if either of those circumstances is true? Well, we can find out relatively easily. Instead of what we typically do, which is applying a EPS growth rate and entering our projected PE multiple, let's just hardcode $28.27, which is the average EPS estimate from analysts into 2028. So, this is the only column we're going to be closely paying attention to. So, we'll go ahead and plug it in. 28.27. Now, what type of PE multiple do we believe the company will trade at? Again, let's not be overly optimistic. They're going to grow earnings at a high rate for some time in the future, but that growth won't survive forever. So, even if they're trading at just a 20p multiple, that would be implying a total return of 58.3% or a compounded return of 16.5% plus the nice starting yield of 0.7% that you can add onto that over the years. So, you're looking at compounded returns of over 17% through the year 2028. But what if they get to $30 in EPS? $30 of EPS. Now, we're talking about nearly 19% compounded return. And this is assuming a very conservative PE multiple. In fact, it's assuming a PE multiple that's even lower than what the company is currently trading at. So even if we assume that that PE multiple continues to contract, investors are willing to pay less for each dollar of earnings for Broadcom, forward-looking returns at least to the year 2028 still look incredibly attractive. If the PE multiple is closer to its historic average, which you can see is currently sitting at about 24, maybe it's closer to around 22. All of a sudden, you're looking at compounded returns of above 22%. This is why I'm still so excited to hold Broadcom in my portfolio. And it's the reason that over the last year, as we saw pullbacks in the share price, for example, I added some shares in March. It's the reason I'm so excited to continue to add shares when there's opportunities in Broadcom stock. And I think right now it's trading at a very reasonable valuation multiple. But again, what you have to understand is you're going to see a lot of volatility with these types of holdings. In December, the stock went from trading at around $410 a share to just a few days later all the way down to 326. Now, this year, the stock at one point was trading at 480, quickly fell all the way to 372 and is now down to 357. You have to have the stomach to be able to hold these types of positions. And what's interesting is when you look at the 5-year chart, yes, the growth has just been absolutely phenomenal, but the volatility has been there the whole time. You have to have a long-term mindset when you have a stock going from $250 all the way down to $150 a share. A stock going from $400 a share all the way down to 300. So, if you do add to this position, add it with the mindset that you're going to hold for at least the next 3 to 5 years minimum. Obviously, unless something about the thesis fundamentally changes. And of course, along the way, you're going to continue to see exceptional dividend growth, which is simply the cherry on top. So, go ahead and let me know what you think of Broadcom in the comments down below if you plan on buying or selling. And like always, be sure to check out tickerdata.com at the link in the description so you can automatically import stock financials directly into your spreadsheet and also get access to new features such as ticker data in Excel and the ticker data sidebar which is going to make analysis even easier. So, with all that being said, please don't forget to like and subscribe to the