1 Lesson Investors Should Take Away From Broadcom's Latest Earnings
Key Points
Broadcom's stock sank after the company narrowly missed an informal "whisper number."
Revenue still grew 48%, reaching $22.18 billion.
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Usually, when a company posts record revenue, it's good news for the stock and its shareholders. Unfortunately, this was not the case this week when Broadcom (NASDAQ: AVGO) announced its latest earnings. Despite beating Wall Street's expectations and posting truly impressive growth, the stock sank because it missed analysts' earnings-per-share "whisper number," or the informal consensus, by a slim margin.
The lesson for investors is, once again, that short-term noise should largely be ignored. Long-term fundamentals still matter, and a decrease in a stock's price based on hype or noise is nothing more than an irrational overreaction. Broadcom's fundamentals remain incredibly strong.
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Broadcom's revenue grew 48% year over year, and its artificial intelligence (AI) semiconductor revenue exploded by 143%, with another $30 billion in bookings.
Image source: The Motley Fool.
Broadcom's management remains bullish and expects semiconductor revenue to grow 200% year over year to $16 billion. The company's stock is up more than 60% in the past 12 months.
The lesson for investors is a valuable one. Wall Street has set an unreasonably high bar for AI-related companies. It was inevitable that, at some point, expectations would outpace reality. This is what happened with Broadcom this week. It doesn't mean Broadcom is losing steam, however.
For buy-and-hold investors, this is nothing more than an opportunity to load up on more of the stock. Broadcom remains a worthy investment.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Broadcom. The Motley Fool has a disclosure policy.
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