Broadcom Earnings Preview Amid Semiconductor Slump

Broadcom (AVGO) will report earnings in Thursday’s postmarket session against a backdrop of mixed results for other computer chip makers and waning momentum for the overall semiconductor sector, not to mention the ever-present threat of tariffs and potential legislative changes for this critical industry.

Perhaps one of the more understated powerhouses of the S&P 500, Broadcom ranks #8 in overall market cap at about $1.4 trillion and is up about +116% off its April lows. The Street is looking for earnings of $0.73 vs. last year’s figure of $0.43 (+69%) and for revenue of $2.06B compared to $1.52B year-over-year (+36%), according to Zacks. The options market projects a potential expected move between about 281 and 319, or roughly +/- 6.3%, for the Sep. 5 expiration.

Analysts seem to remain bullish on AVGO shares, as Morgan Stanley yesterday raised its price target to $357 from $338 while maintaining its overweight rating and Oppenheimer last week also boosted its target to $325 from $305 and kept its outperform rating.

However, the Vaneck Semiconductor ETF (SMH) illustrates the broader slowdown for the group as a whole; price is up only +0.7% from when this quarter’s earnings season began on Jul. 14 to yesterday’s close, after the index last week failed to break above its old highs just below 303. Nvidia (NVDA) and Marvell Technology (MRVL) in particular stand out from this group of recent earnings, as both fell after reporting their results. Nvidia beat estimates for both earnings and revenue, but data-center revenues came in slightly lower than expected and Alibaba’s (BABA) announcement of its own A.I. chip sent shares lower. Meanwhile, Marvell faced a -18% rout after its own earnings showed that same critical data-center revenue segment missed estimates and current quarter guidance came in softer than expected. 

Broadcom’s chart is quite similar to that of SMH, showing a matching failure to take out its old highs from mid-August of around 317. Price also temporarily dipped below its trendline that began with June 24’s gap to the upside as well as the 21-day Exponential Moving Average, but managed to claw its way back above this confluence near the 298 level. This now becomes a potential supportive area to watch, as well as lower near the recent double-bottom lows near 282. To the upside, 311 is the relative high to beat from last week.