NVDA Earnings Raised Bar for AVGO, Stock Valuation Brings it Back Down

take a closer look here at Broadcom and its setup. Going into this event we've got Vance Howard the CEO and portfolio manager of Howard Capital Management. And Mike Binger, the President at Gradient Investments with us today. Great to have you both on. Vance. Let's start with you. What are you looking for for Broadcom today. I mean significant growth is expected. But what numbers are you looking for that are going to be good enough to move shares to the upside. You know I think what my expectations are. And after the bell we'll get a better sense of what's going to take place. But even if they have blowout numbers I mean you're competing against Nvidia, which Nvidia was just absolutely amazing numbers. So it's going to be really tough to beat on that. I think that's going to weigh heavy on the stock that their numbers are just going to have to be astronomical to push the stock higher. And if you look at it from a technical standpoint, the stock just feels heavy. It just feels like it's being weighted down. So you know I'm cautiously optimistic. All right. So we're cautiously optimistic. Mike how are you feeling as we come into this report. I mean the Nvidia test came and went. We saw Nvidia buckets trend of moving lower after earnings. Finally I think it was six of the last eight quarters. It was lower after earnings. They did finally get this positive reaction. What does Broadcom have to do to stay in that same lane. And how much did Nvidia's blockbuster numbers raise the bar for them even higher. Well I think when you look at Nvidia and you look at Dell, their numbers confirm that the AI CapEx spend and revenue growth is still there. Broadcom plays completely into that theory. I mean they're one of the leading chip providers in the AI chip space and these chips. I think there's a real disconnect between the earnings growth and the valuation of this stock. I mean this stock has come down from 470 something down to 370 something. So when you have a 60% EPS growth that trades at 19 times, I think there's opportunity there. And I think what what else I really see is that earnings expectations on sales and revenue and all that. They're just a little bit below the guidance. So I think the setup is pretty easy coming into Broadcom's report tonight. And Mike, why isn't the market giving Broadcom a higher multiple. Well the first quarter was a little bit disappointing. More so on the guidance. I think people wanted more. I mean the big number to look at tonight is going to be their AI semi number. They guided to about 16 billion. I think expectations on consensus are actually just a you know a tad bit below that. So if they can beat that $16 billion number I you know I think the stock goes higher from here. And Vance how much do they have to beat that number by. I don't think there's any argument that that is the most important metric here. And you are right Mike. The consensus is below 16 billion. Just a hair below. But we've already seen it has to be a beat, a significant beat at that in most cases. What's the number need to be for the market to react positively to advance? Well, that's anybody's guess. But you know, my clients are custom AI demand is very, very high. And it's actually been growing. I don't know really what that number is going to be, but I know the tone of their call after markets close and the way that they they couch things, especially customer demand. And like Mike said, it was very, very good. I think that could have a big impact on moving the stock higher. And, you know, and I hope that it does. There's just so much good news from Dell. So much good news from Nvidia. You got to pick one. And if I had to pick one I'd pick Dell in the video over Broadcom at this point in the game. And Mike Broadcom already talked about more than $100 billion in revenue for the fiscal year. But some of the notes I were I was looking at this morning are asking for about 130 to $140 billion. I mean how realistic are those expectations. Have we gotten out a little over our skis in terms of what numbers we're expecting them to guide for today. Yeah. I mean that's a key number. You know I mean that 100 billion in revenue there. If I don't, it's my sense that the market is not expecting $140 billion number. You know I think they need to confirm the 100 and maybe exceed that a little bit in their conversations. I mean look Broadcom has to beat their numbers in my opinion in this quarter. And they also have to have a positive tone and confirm that the AI trade is still on. And demand is still there in their guidance call after that. So you know I just think if the stock was at $470, I think expectations would have to be wildly exceeded. But down here at this valuation, I think if they can just be positive exceed, you know, consensus guidance and frankly their own guidance, I think the stock has the ability to move higher from here. We will know at 415 eastern. Really appreciate you both being with us. Vance