Broadcom stock price has crashed into a technical bear market after falling by over 24% from its highest point in December last year.
AVGO dropped to 314, with its market capitalisation dropping from over $1.9 trillion to $1.5 trillion.
So, will the new deal with Anthropic fuel its comeback?
Broadcom inks major deal with Anthropic
Broadcom, a top player in the technology industry, has come under pressure in the past few months, mirroring the performance of other top companies in the industry like NVIDIA and AMD.
AVGO stock will be in the spotlight this week after the company reached a major deal with Google and Anthropic.
It will produce the new versions of Google’s Tensor chips and reached a deal with Anthropic that will see it sell about 3.5 gigawatts of computing capacity.
The announcement came at a time when Claude, Anthropic’s chat platform has become a big success and is now the top free app on the App Store.
Also, its annualized revenue jumped to over $30 billion from $9 billion at the end of last year.
Analysts now believe that the company will make billions of dollars from Anthropic.
In a note, Mizuho analysts predicted that the company would make $21 billion from Anthropic in 2026 and $42 billion in 2027.
Broadcom has also inked more deals with other companies in the artificial intelligence industry. For example, it entered a multi-billion-dollar deal to manufacture chips for OpenAI.
Broadcom’s growth momentum is continuing
The new partnership with Broadcom comes at a time when its business is doing well.
Its most recent results showed that its revenue jumped by 28% in the fourth quarter to over $18 billion.
The revenue rally happened as the AI revenue jumped by 74%, with the management expecting its revenue to jump to $8.2 billion.
Wall Street analysts believe that Broadcom’s business continued doing well in the first quarter.
The average estimate among analysts is that its revenue rose by 47% YoY in Q1 to over $22 billion.
Its annual revenue will be $104 billion, up by 63% YoY, a notable thing considering that Broadcom was started in 1991.
There are signs that the Broadcom stock has become relatively undervalued.
For example, its forward price-to-earnings ratio has dropped to 27, down from the five-year average of 47.
The company is also a bargain when using the rule-of-40 multiple, which is a common approach for valuing software companies.
Its forward revenue growth metric is 63%, while its net profit margin has jumped to 36%.
This growth gives it a rule-of-40 multiple of 99%.
Wall Street analysts are highly bullish on the AVGO stock, with the consensus price target being $435, much higher than the current $314.
For example, Morgan Stanley analysts have a target price of $470, while JPMorgan believes it can jump to $500.
Broadcom stock price technical analysis
AVGO stock chart | Source: TradingView
The three-day chart shows that the AVGO stock price has dropped sharply in the past few months, moving from a high of $413 in December to the current $315.
Broadcom has bottomed at the 100-day Exponential Moving Average (EMA).
On the positive side, the stock has formed a large bullish flag pattern and is now in the flag section.
Therefore, the stock will likely have a strong bullish breakout, potentially to the year-to-date high of $413, which is about 32% above the current level.
A drop below the 200-day moving average at $292 will invalidate the bullish outlook.
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