Broadcom (AVGO), a global technology company, has helped investors make large profits, with its stock rising nearly 100% last year to outperform the tech-heavy Nasdaq Composite's ($NASX) 44.5% gain. The company’s diversified business operations include semiconductors and infrastructure software. 

Not only is Broadcom rapidly increasing its revenue and earnings, but it has also made strategic acquisitions that will advance its product portfolio in the coming years. With a strong end to fiscal 2023 and a positive outlook for fiscal 2024, investors appear to be interested in this growing stock - AVGO shares are already up 9.2% year to date.

In general, Wall Street is optimistic about semiconductor companies in the midst of the artificial intelligence (AI) boom. Let’s find out if Wall Street believes Broadcom can soar in 2024.

AVGO: Not Just A Semiconductor Player, But a Diversified Tech Giant

While Broadcom generates a significant amount of revenue from its semiconductor business, its operations also involve infrastructure software. Nonetheless, its semiconductor CAGR growth of 18% over the last three years has been a driving force behind its rapid revenue growth. 

Between fiscal 2015 and fiscal 2023, Broadcom’s net revenue has grown at a compounded annual growth rate (CAGR) of 20%. Similarly, earnings have increased at a CAGR of 15.5% over the same period. This helps to explain the staggering 1,914% surge in AVGO’s share price in the last decade.

Prior to 2020, Broadcom acquired Symantec's Enterprise Security Business and CA Technologies to expand its infrastructure software segment. Since then, Broadcom had not made any strategic acquisitions; however, the company purchased cloud software company VMware last year for a hefty sum of $61 billion in cash and stock. Over the next three years, the deal is expected to increase infrastructure software revenue by 49% and generate $8.5 billion in pro forma EBITDA (earnings before interest, tax, depreciation, and amortization).

For the full fiscal year 2023, the Semiconductor Solutions segment's revenue increased by 9% to $28.1 billion, accounting for 79% of total revenue. Meanwhile, infrastructure software revenue increased by 3% year on year. Broadcom's total revenue increased to $35.8 billion from $33.2 billion in fiscal 2022. Diluted earnings also increased by 24% to $32.98 per share for the year.

Taking into account the VMware acquisition, management expects consolidated revenue of around $50 billion in fiscal 2024. This will represent a 40% increase year on year. The company expects the integration to take a year, with at least $1 billion in transition costs. However, management expects adjusted EBITDA to account for 60% of projected revenue.

Meanwhile, analysts predict revenue growth of 39% to $49.8 billion, and earnings growth of 11% to $46.91 per share in fiscal 2024.

The Road Ahead for AVGO

For growth- and income-seeking investors, the cherry on top for Broadcom is that it's also a dividend stock. It pays a quarterly dividend, yielding 1.9%, compared to the tech sector average of 1.4%. Along with the quarterly results, the company announced a 14% increase in its quarterly dividend to $5.25.

On the balance sheet, the company recorded $14 billion in cash and cash equivalents at the end of the fiscal year. It also generated $17.6 billion in free cash flow, which should help fund future dividend payments and AI investments.

With healthy FCF growth and a payout ratio of 37%, there is an opportunity for dividend growth as earnings rise. 

Analysts estimate Broadcom's revenue and earnings to increase by 10% and 19%, respectively, in fiscal 2025. Currently, AVGO trades at 22 times forward 2025 earnings and 10 times forward sales, which seems reasonable in comparison to its peers in the semiconductor industry.

What Do Analysts Say About Broadcom?

Broadcom stock has bagged a consensus “strong buy” rating from the analyst community. Out of the 24 analysts that cover the stock, 20 rate it a “strong buy,” and four rate it a “hold.” 

Following the Q4 results, AVGO has surpassed its mean target price of $1,140.98. Its high target price of $1,325 implies a potential upside of 8.5% from current levels.

The Bottom Line for Broadcom Stock

Broadcom's diverse product portfolio, combined with AI advancements and strategic acquisitions, could help the company achieve outstanding growth in the coming years. With its reasonable valuation, now might be the time to buy this growth-and-income stock and hold it for the long term.