Here are stock split stocks that have soared 10,610% over the past 15 years. By 2025, it will join Apple, Nvidia, Microsoft, Amazon, Alphabet, and Meta in the $1 trillion club.
Recent advances in the field of artificial intelligence (AI) show that technology has become dominant over the past two decades, putting technology issues at the top of the list of the world’s most valuable companies. It wasn’t always like that. Just 20 years ago, General Electric and ExxonMobile were the leaders in terms of market capitalization, valued at $319 billion and $283 billion, respectively.
Technology rules the world these days. Apple, Nvidia, and Microsoft are each worth more than $3 trillion and led the leaderboard at some point in 2024. Other big tech companies in the $1 trillion club are also household names, including Amazon, Alphabet, and Meta Platforms, with valuations of $1.5 trillion and $2.3 trillion.
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Broadcom’s market cap is approximately $797 billion (as of this writing) (NASDAQ:AVGO) It’s like a lottery to become a member of this special fraternity. The company offers a wide range of products that are critical components of the data center infrastructure where most AI processing takes place, and its essential technology could be the driving force behind Broadcom’s successful member acquisition efforts.
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In addition to being one of the world’s leading custom chip manufacturers, Broadcom also offers many complementary products and services in the mobile, cable, broadband and data center areas. The company states that “99% of all Internet traffic travels through some type of Broadcom technology.” This broad reach illustrates why Broadcom’s technology is an important part of the generative AI ecosystem, as its technology resides primarily in the cloud and data centers.
Beyond AI, investors continue to underestimate opportunities, exemplified by Broadcom’s acquisition of VMware late last year. In a recent earnings call, management said that “VMWare bookings continue to accelerate,” with third-quarter volume reaching $2.5 billion, an increase of 32% sequentially.
Additionally, the company continues to reduce spending on VMWare. CEO Hock Tan said the VMWare integration is progressing as expected and Broadcom is on track to achieve its goal of $8.5 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 2025. He said he was on board. Once the process is complete, the company expects margin expansion and increased profits.
The results highlighted an interesting opportunity. In its fiscal third quarter (ending August 4), Broadcom’s revenue increased 47% year-over-year to $13.1 billion, and adjusted earnings per share (EPS) increased 18% to $1.24. Ta. Management expects this upward trajectory to continue, with full-year revenue guidance increasing to $51.5 billion, representing 44% growth.
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This has added to Broadcom’s long history of strong business and financial performance, fueling a meteoric rise in its stock price. In response, the company declared a 10-for-1 stock split earlier this year, which was completed in July.
Broadcom’s chips and ancillary products, critical components in data center operations, give the company a key role in delivering the AI ecosystem. Broadcom is in an enviable position, and this will be a key driver in the company’s next phase of growth.
Wall Street expects Broadcom to generate $51.7 billion in revenue in 2024, giving the company a forward price-sales ratio of about 15 times. At a constant stock price P/S, Broadcom would need to generate sales of about $65. We invest $1 billion annually to support a $1 trillion market capitalization.
Analyst consensus forecasts are for revenue growth of 44% in 2024 and 17% in 2025. If the company achieves these goals, it will likely reach a market capitalization of $1 trillion as early as mid-2026. That said, I think Wall Street’s growth forecast is conservative, as Broadcom has exceeded analyst expectations in each of the past three quarters. So it’s not unreasonable to expect more of the same next year.
Accelerating AI spending and expanding VMWare adoption should give Broadcom multiple avenues for strong growth next year, which is why the company believes 2025 is a more likely time to join the trillionaire club. I’m thinking.
Management’s observations seem to bear that out, as Broadcom is experiencing “strong demand from hyperscalers for both AI networking and custom AI accelerators.” Additionally, comments from the world’s largest cloud infrastructure providers suggest that demand is not slowing down any time soon.
AI market size estimates continue to increase, but even more conservative estimates are compelling. Generative AI is expected to become a $1.3 trillion market by 2032, according to Bloomberg Intelligence. McKinsey & Company estimates the economic impact to be between $2.6 trillion and $4.4 trillion annually. No one knows how big the opportunity for AI will ultimately be, but most experts agree that the opportunity is much greater than it is today.
Despite Broadcom’s impressive profits, it remains attractively priced, currently selling for just 27 times forward earnings compared to the S&P 500’s multiple of 30. This is not a bad price for a stock that has delivered a total return of 14,500% (including dividends) since its inception. This is especially true in 2009, when the market as a whole increased by just 633%.
That’s why Broadcom stock is a buy.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Danny Vena has held positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and GE Aerospace and recommends the following options: A long January 2026 $395 call on Microsoft and a short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
Here are stock split stocks that have soared 10,610% over the past 15 years. By 2025, it will join Apple, Nvidia, Microsoft, Amazon, Alphabet, and Meta in the $1 Trillion Club. Originally published by The Motley Fool.
