Buy Nvidia (NVDA) & Broadcom (AVGO) Stock for More Upside?
Let's see if investors should still buy Nvidia and Broadcom stock at their current levels and check the outlook of these semiconductor giants.
Buy Nvidia (NVDA) & Broadcom (AVGO) Stock for More Upside?
Among the broader technology sector, many semiconductors stocks fell mightily last year and have been great rebound prospects for 2023.
Nvidia (NVDA) stock has climbed +60% YTD and Broadcom (AVGO) is up +11%, outperforming the S&P 500’s +4% and the Nasdaq’s +8%.
Let’s see if investors should still buy Nvidia and Broadcom stock at their current levels and check the outlook of these semiconductor giants.
Momentum
Much optimism has been building for semiconductor stocks after unprecedented declines last year as high inflation and rising rates crippled these equities along with the broader technology sector.
Many semiconductor stocks participated in early rallies this year but Nvidia stock especially stood out as shares of NVDA soared in January on signs of easing inflation.
Reassuring investors was Nvidia surpassing Q4 top and bottom line expectations in February with Broadcom doing the same last Thursday. This has been a further catalyst for both stocks with Broadcom sporting an “A” Zacks Style Scores grade for Momentum while Nvidia sports a “B”.
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Valuation
With Nvidia and Broadcom stock soaring over the last six months, investors will want to monitor their valuation. In this regard, Broadcom stands out with a “B” Style Scores grade for Value with Nvidia landing a “D” grade at the moment.
AVGO trades at $622 per share but just 15.6X forward earnings which is nicely below its industry average of 19.4X and the S&P 500’s 18.3X. Even better, Broadcom stock trades 36% beneath its decade high of 24.5X and at a slight discount to the median of 16.5X.
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Pivoting to Nvidia, NVDA shares trade at $234 and 53.8X forward earnings which is well above the industry average of 23.4X, but the company is a leader. However, this is notably above the S&P 500 as well, and while Nvidia trades 42% below its decade high of 93.5X it also trades 42% above the median of 37.9X.
Growth
The growth prospects of Nvidia and Broadcom could be a further indication of more upside in their stocks and their outlooks are still attractive. Broadcom has an “A” Style Scores grade for Growth with Nvidia at a “B”.
Nvidia’s year-over-year growth is very appealing and Broadcom’s bottom line remains massive with the company still growing.
Broadcom’s earnings are expected to jump 9% in fiscal 2023 and rise another 6% in FY24 at $43.65 per share. On the top line, sales are forecasted to be up 6% this year and rise another 4% in FY24 to $36.80 billion.
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Turning to Nvidia, its fiscal 2024 earnings are projected to soar 34% and climb another 33% in FY25 at $5.98. Sales are expected to rise 10% in FY24 and leap another 24% in FY25 to $36.83 billion
Image Source: Zacks Investment Research
Takeaway
Nvidia and Broadcom stock both land a Zacks Rank #3 (Hold). There could be better buying opportunities ahead after such stellar rallies to start the year but holding on to both stocks at their current levels could be rewarding especially when considering their momentum at the moment.
While NVDA and AVGO shares may look due for a large pullback their historical performances also indicate it may be worth holding on to these semiconductor giants.To that point, Nvidia stock is up a mind-boggling +7,308% over the last decade with Broadcom up an impressive +1,633% to easily top the Nasdaq’s +249% and the S&P 500‘s +159%.
Furthermore, Nvidia should continue offering valuable exposure to visual computing technologies through its graphic chips with Broadcom providing diversity through a broad range of semiconductor devices and solutions.
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