NVIDIA (NASDAQ: NVDA)Broadcom (NASDAQ: AVGO)Super Microcomputer (NASDAQ:SMCI) The three companies (also known as Supermicro) have some things in common: All three are benefiting from surging demand for artificial intelligence (AI). All three have announced 10-for-1 stock splits in 2024. Their stock prices have soared this year but have fallen sharply in recent weeks.
Another thing Nvidia, Broadcom, and Supermicro have in common is that they’re all well-liked by analysts. But which stock splitting stocks are Wall Street’s favorite right now?
Winners based on buy recommendations
Perhaps the easiest way to gauge which of these stocks Wall Street is most bullish on is to look at the buy recommendations for each one, and one of them appears to be the clear winner.
Of the 29 analysts covering Broadcom surveyed by LSEG in September, 10 rate the company’s shares as a “strong buy.” An additional 17 recommend Broadcom as a “buy,” meaning 93% of analysts like the company’s stock. Incidentally, no analysts surveyed recommend selling Broadcom. The two outliers rate the company’s shares as a “hold.”
Nvidia is a distant second. LSEG surveyed 38 analysts covering the stock this month. Seven recommended Nvidia as a “strong buy,” while another 14 recommended it as a “buy.” That means 55% of analysts have a positive view. Most other analysts rate Nvidia as a “hold.” However, one analyst rates the stock as an “underperform,” while another has recommended selling.
This puts Supermicro in third place: Of the six analysts surveyed by LSEG in September, only two (33%) recommended buying the company’s shares. The other four analysts rated Supermicro as a “hold.”
Winners Based on Price Targets
But there’s another way to gauge what Wall Street thinks about a stock: When analysts issue a buy, hold, or sell (or equivalent) recommendation, they also publish a 12-month price target.
Using this approach, Supermicro comes out on top. The average price target for the stock reflects an upside potential of 105%. The most optimistic analysts believe Supermicro’s stock price could rise by more than 3.6x.
NVIDIA is again the runner-up. The average Wall Street price target for the company’s shares is about 22% above its current price. However, one particularly enthusiastic analyst predicts that NVIDIA shares will rise 69%.
Broadcom topped analysts’ buy recommendations but was last on price targets. The average target price for the stock suggests upside potential of 15%, which isn’t bad, but it’s well below the price targets of Supermicro and Nvidia. The most optimistic analysts think Broadcom can rise another 42% or so over the next 12 months.
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Controversy, Concerns and Confidence
The main reason why a minority of analysts are recommending buying Supermicro is the recent controversy that has erupted after short sellers accused the company of manipulating its accounting. I suspect that the 12-month target price has not yet fully reflected this news. It is too early to tell how things will play out. Investors may be better off following the advice of analysts to hold Supermicro if they are holding it, or refrain from buying for now if they are not.
NVIDIA is ranked in the middle part of the pack in part because Wall Street is concerned about the company’s declining gross margins and a possible economic downturn. I don’t think investors need to worry about declining gross margins. First, gross margins are still very high (75.1% in the second quarter). NVIDIA also has new Blackwell chips coming out, which should help boost gross margins.
What about the possibility of the U.S. falling into a recession? I wouldn’t rule that out. On the other hand, the Federal Reserve may cut interest rates in the near future, which could help prevent a recession.
I agree with analysts’ generally bullish views on Nvidia and Broadcom. Both companies’ businesses continue to perform well, and I think there is reason for investors to be confident in both companies’ growth prospects. I don’t know if Nvidia or Broadcom will reach Wall Street’s target prices, but I wouldn’t bet against either stock.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Which stock splits Wall Street likes the most: Nvidia, Broadcom or Supermicro? was originally published by The Motley Fool.
