Why Broadcom Stock Is Bouncing Higher Today
Key Points
JPMorgan is steadfast in its bullish view of Broadcom stock.
Broadcom stock is trading at a premium to its historical valuation.
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Recovering from the 4.6% drop from the close of trading on Monday to the end of yesterday's market session, Broadcom (NASDAQ: AVGO) stock is rocketing higher today. Investors are bidding the semiconductor specialist higher after learning of a firm's bullish perspective on Broadcom stock.
As of 11:07 a.m ET, shares of Broacdom are up 4.8%.
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This dominant stock is a screaming buy in one firm's estimation
Reiterating an overweight rating and a $580 price target on Broadcom stock, JPMorgan sees significant potential in the semiconductor stock right now. According to Thefly.com, the firm bases its perspective on the view that the market doesn't appreciate the company's "significant dominance" across various aspects of its business, including advanced packaging design, consistent release of new designs, intellectual property portfolio, and track record of execution.
Furthermore, the firm states that it would be "aggressive buyers at current levels."
Based on Broadcom's shares closing at $376.71 yesterday, JPMorgan's $580 price target -- a potential all-time high for the stock -- implies upside of 54%.
Is Broadcom stock a buy after today's jump?
While JPMorgan's opinion on Broadcom stock is noteworthy, investors must exercise due diligence before buying shares. Shares of Broadcom, priced at 63.7 times trailing earnings, are trading at a premium to their five-year average P/E of 26, so for those seeking a bargain, it's best to look elsewhere at this point and consider a different semiconductor stock.
For those comfortable with the premium valuation, it's important to see whether the company reports progress with Alphabet on the next-gen Google Tensor Processing Unit v9 2nm program. Should Alphabet look to another company to supply the components, the market may punish Broadcom's stock.
Should you buy stock in Broadcom right now?
Before you buy stock in Broadcom, consider this:
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JPMorgan Chase is an advertising partner of Motley Fool Money. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Broadcom, and JPMorgan Chase. The Motley Fool has a disclosure policy.
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