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AVGO Expands Cloud Portfolio: Should You Buy, Hold or Sell the Stock?
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Broadcom (AVGO - Free Report) shares have returned 43% year to date, outperforming the Zacks Electronics - Semiconductors industry’s growth of 26.2% in the same time period. The outperformance reflects investors’ confidence in the AVGO stock, considering the company’s sustained focus on enhancing cloud offerings, which is helping it win new clients.
Recently, Broadcom launched a new private cloud offering in collaboration with Hitachi Vantara. The co-engineered solution has been developed by integrating Vantara’s Unified Compute Platform RS and Broadcom’s VMware Cloud Foundation.
This new private cloud offering is expected to be adopted by organizations that want to minimize the costs of owning a native cloud ecosystem. Companies that want to reduce the complex operations in hybrid and multi-cloud are also likely to adopt the solution.
By outsourcing the cloud requirements, organizations will be able to leverage Broadcom-owned VMware’s proven cloud infrastructure and scale per their requirement without the hassles of owning their own cloud infrastructure.
The solution will also enable organizations with leading automation offerings and software-defined services. Alongside all these features, the offering also delivers flexibility in deployment, simplification in management and sustainability in operations.
Broadcom expanded its hybrid cloud portfolio with the acquisition of VMware in 2023. The acquisition benefited AVGO by accelerating app delivery, enabling zero-trust security and delivering software-defined services to its customers.
Alongside VMware hybrid cloud, AVGO has been offering Symantec Enterprise Cloud for a long time. The Symantec Enterprise Cloud is used by industry leaders for data-centric hybrid security. Broadcom also partnered with Alphabet’s (GOOGL - Free Report) Google Cloud to align their solutions so mutual customers can benefit from these offerings.
Together with Alphabet’s Google Cloud, Broadcom has ensured network solution integrations and simplification of migration from VMware Cloud Foundation to Google Cloud VMware Engine.
Alongside these milestones, AVGO has also broadened its Advantage Partner Program for VMware Cloud Service providers. The program enables cloud service partners to offer sovereign cloud services with high compliance and data residency for a consistent cloud experience across various environments. This initiative has enabled Broadcom to comply with the European public policy goals.
Broadcom is also focusing on shifting VMware products to a subscription-based model. AVGO has signed up approximately 3,000 customers to develop its own virtual private cloud on-premise infrastructure, which boosted Broadcom-owned VMware’s Annualized Booking Value. This step increased VMware’s annualized booking revenues from $1.2 billion in the first quarter of 2024 to $1.9 billion in the second quarter.
Increasing Competition Remains a Concern
Per a report by Mordor Intelligence, the cloud computing market is expected to witness a compound annual growth rate of 16.4% from 2024 to 2029. The high growth potential has made this market highly fragmented and competitive.
Google Cloud, Amazon’s (AMZN - Free Report) Amazon Web Services and Microsoft’s (MSFT - Free Report) Azure are the leaders in the cloud computing space. Competition from these well-settled players are putting pricing pressure that could negatively impact Broadcom’s margins.
What Investors Should Do With AVGO Stock
Broadcom’s strong portfolio, along with an expanding partner base, surely reflects solid top-line growth potential over the long run. However, AVGO stock is not so cheap, as the Value Style Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, Broadcom’s shares are trading at 12.84X, higher than its median of 11.41X and the Zacks Electronics - Semiconductors industry’s 6.37X.
Image: Bigstock
AVGO Expands Cloud Portfolio: Should You Buy, Hold or Sell the Stock?
Broadcom (AVGO - Free Report) shares have returned 43% year to date, outperforming the Zacks Electronics - Semiconductors industry’s growth of 26.2% in the same time period. The outperformance reflects investors’ confidence in the AVGO stock, considering the company’s sustained focus on enhancing cloud offerings, which is helping it win new clients.
Recently, Broadcom launched a new private cloud offering in collaboration with Hitachi Vantara. The co-engineered solution has been developed by integrating Vantara’s Unified Compute Platform RS and Broadcom’s VMware Cloud Foundation.
This new private cloud offering is expected to be adopted by organizations that want to minimize the costs of owning a native cloud ecosystem. Companies that want to reduce the complex operations in hybrid and multi-cloud are also likely to adopt the solution.
By outsourcing the cloud requirements, organizations will be able to leverage Broadcom-owned VMware’s proven cloud infrastructure and scale per their requirement without the hassles of owning their own cloud infrastructure.
The solution will also enable organizations with leading automation offerings and software-defined services. Alongside all these features, the offering also delivers flexibility in deployment, simplification in management and sustainability in operations.
Broadcom Inc. Price and Consensus
Broadcom Inc. price-consensus-chart | Broadcom Inc. Quote
How Deep is AVGO’s Existing Cloud Expertise?
Broadcom expanded its hybrid cloud portfolio with the acquisition of VMware in 2023. The acquisition benefited AVGO by accelerating app delivery, enabling zero-trust security and delivering software-defined services to its customers.
Alongside VMware hybrid cloud, AVGO has been offering Symantec Enterprise Cloud for a long time. The Symantec Enterprise Cloud is used by industry leaders for data-centric hybrid security. Broadcom also partnered with Alphabet’s (GOOGL - Free Report) Google Cloud to align their solutions so mutual customers can benefit from these offerings.
Together with Alphabet’s Google Cloud, Broadcom has ensured network solution integrations and simplification of migration from VMware Cloud Foundation to Google Cloud VMware Engine.
Alongside these milestones, AVGO has also broadened its Advantage Partner Program for VMware Cloud Service providers. The program enables cloud service partners to offer sovereign cloud services with high compliance and data residency for a consistent cloud experience across various environments. This initiative has enabled Broadcom to comply with the European public policy goals.
Broadcom is also focusing on shifting VMware products to a subscription-based model. AVGO has signed up approximately 3,000 customers to develop its own virtual private cloud on-premise infrastructure, which boosted Broadcom-owned VMware’s Annualized Booking Value. This step increased VMware’s annualized booking revenues from $1.2 billion in the first quarter of 2024 to $1.9 billion in the second quarter.
Increasing Competition Remains a Concern
Per a report by Mordor Intelligence, the cloud computing market is expected to witness a compound annual growth rate of 16.4% from 2024 to 2029. The high growth potential has made this market highly fragmented and competitive.
Google Cloud, Amazon’s (AMZN - Free Report) Amazon Web Services and Microsoft’s (MSFT - Free Report) Azure are the leaders in the cloud computing space. Competition from these well-settled players are putting pricing pressure that could negatively impact Broadcom’s margins.
What Investors Should Do With AVGO Stock
Broadcom’s strong portfolio, along with an expanding partner base, surely reflects solid top-line growth potential over the long run. However, AVGO stock is not so cheap, as the Value Style Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Sales ratio, Broadcom’s shares are trading at 12.84X, higher than its median of 11.41X and the Zacks Electronics - Semiconductors industry’s 6.37X.
Broadcom currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.