Broadcom’s Chart Has Some Issues Ahead of Next Week’s Earnings
Tech giant Broadcom 
AVGO -- which will post fiscal Q4 earnings next Thursday (Dec. 12) -- has reacted in a volatile fashion almost immediately over the past year or so whenever the company releases results. But then it has often reversed that initial move a few days later.
What does AVGO’s technical and fundamental analysis say ahead of the latest report? Let’s check it out:
Broadcom’s Fundamental Analysis
As I write this, Wall Street’s consensus estimate for AVGO’s results is calling for $1.39 of adjusted earnings per share, $0.70 in GAAP EPS and $14.1 billion of revenues.
That would represent a 25% gain from the $1.11 in adjusted earnings per share that Broadcom posted in the same quarter last year, along with a 51% year-over-year rise in revenues.
If those estimates hold true, Broadcom’s latest results would represent the company’s fourth consecutive quarter of large year-on-year sales growth.
In fact, about two thirds of analysts tracking Broadcom have increased their estimates for the firms' upcoming results since the quarter began.
But looking ahead, the Street is expecting such gains to diminish rapidly -- perhaps as soon as the company’s current quarter.
For the next three fiscal quarters, analysts’ consensus estimates for year-over-year revenue growth are running at roughly 22%, 17% and 17%, respectively.
Yet so far, Broadcom has been a cash-flow beast. Over the trailing 12 months ended Aug. 4, AVGO generated $19.2 billion of operating cash flow, out of which came just $531 million of capital expenditures (or “capex”).
That left $18.7 billion of 12-month free cash flow. Out of that number, the firm repurchased $11.8 billion of common stock. Broadcom also dished out $9.2 billion of cash dividends to shareholders.
It’s interesting that the firm’s capital return to shareholders (some $21 billion of dividends and stock repurchases) actually exceeded Broadcom’s huge free cash flow.
Looking at the stock’s balance sheet, Broadcom ran a $10 billion cash position and $1.9 billion of inventories as of Aug. 4, with total current assets at $19.9 billion.
Meanwhile, current liabilities added up to $19.2 billion -- including $3.1 billion of shorter-term debt and $9.8 billion of unearned revenue.
True, this technically put the firm's current ratio at 1.04, which would barely pass muster for many investors. However, once we adjust AVGO’s balance sheet for those $9.8 billion deferred revenues (which many investors don’t consider “true” liabilities), the current ratio rises to a much more comfortable 2.11.
Still, the company’s balance sheet has other potential issues if we dig a little deeper.
For example, Broadcom’s total assets amount to $168 billion, but that includes $140.9 billion of goodwill and other intangibles -- 84% of the total. That's very high by Wall Street standards.
Separately, total liabilities less equity came to $102.3 billion. That includes $66.8 billion of long-term debt, which looks a bit heavy relative to the company’s cash position.
All in, the fundamentals tell me investors might approach this stock with a certain level of caution.
Broadcom’s Technical Analysis
Here’s AVGO’s chart since early 2024, which also says “buyer beware” in some ways:
Readers will see that the stock has formed a large “double-top reversal” pattern, as denoted by the two pyramids shaded in red. This is traditionally a pattern of bearish reversal.
AVGO’s double-top has a $128 pivot point (the nadir between the two pyramids’ peaks).
Since forming this pattern, Broadcom has moved sideways of late -- but neither created a new top nor tested the double top’s $128 low. So, the pattern looks like it’s still valid. Again, that could be a bearish sign.
Meanwhile, readers will also see that in November, Broadcom’s 21-day Exponential Moving Average (or “EMA,” denoted with a green line above) crossed below the stock’s 50-day Simple Moving Average (or “SMA,” marked with a blue line).
This is a signal that veteran swing traders sometimes to get out of or avoid long-side trades. (Other swing traders use shorter moving averages.)
Still, note that Broadcom’s Relative Strength Index (the gray line at the chart’s top) is almost perfectly neutral.
Meanwhile, the stock’s daily Moving Average Convergence Divergence indicator (or “MACD,” denoted by black and gold lines and blue bars at the chart’s bottom) has improved, but isn’t really positive just yet.
Within that MACD, the histogram of Broadcom’s 9-day EMA (marked blue bars) has crossed above zero. That’s historically a positive sign.
The stock’s 12-day EMA (the black line) has similarly crossed above the 26-day EMA (the gold line). That’s also typically positive.
However, both the 12- and 26-day EMAs are still below zero – a potentially negative sign. In fact, some traders consider that reason enough alone to avoid longer-term trades in a stock with such a reading.
All in all, I personally think there are enough concerns to show caution with Broadcom going into next week’s earnings report. Personally, I have no position in the stock.
(Stephen “Sarge” Guilfoyle is Moomoo Technologies Inc.’s markets commentator.)
This article discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material.
Moomoo and its affiliates make no representation or warranty as to the article's adequacy, completeness, accuracy or timeliness for any particular purpose of the above content. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services on Moomoo are offered by Moomoo Financial Inc., Member FINRA/SIPC.
TradingView is an independent third party not affiliated with Moomoo Financial Inc., Moomoo Technologies Inc., or its affiliates. Moomoo Financial Inc. and its affiliates do not endorse, represent or warrant the completeness and accuracy of the data and information available on the TradingView platform and are not responsible for any services provided by the third-party platform.
AVGO -- which will post fiscal Q4 earnings next Thursday (Dec. 12) -- has reacted in a volatile fashion almost immediately over the past year or so whenever the company releases results. But then it has often reversed that initial move a few days later.What does AVGO’s technical and fundamental analysis say ahead of the latest report? Let’s check it out:
Broadcom’s Fundamental Analysis
As I write this, Wall Street’s consensus estimate for AVGO’s results is calling for $1.39 of adjusted earnings per share, $0.70 in GAAP EPS and $14.1 billion of revenues.
That would represent a 25% gain from the $1.11 in adjusted earnings per share that Broadcom posted in the same quarter last year, along with a 51% year-over-year rise in revenues.
If those estimates hold true, Broadcom’s latest results would represent the company’s fourth consecutive quarter of large year-on-year sales growth.
In fact, about two thirds of analysts tracking Broadcom have increased their estimates for the firms' upcoming results since the quarter began.
But looking ahead, the Street is expecting such gains to diminish rapidly -- perhaps as soon as the company’s current quarter.
For the next three fiscal quarters, analysts’ consensus estimates for year-over-year revenue growth are running at roughly 22%, 17% and 17%, respectively.
Yet so far, Broadcom has been a cash-flow beast. Over the trailing 12 months ended Aug. 4, AVGO generated $19.2 billion of operating cash flow, out of which came just $531 million of capital expenditures (or “capex”).
That left $18.7 billion of 12-month free cash flow. Out of that number, the firm repurchased $11.8 billion of common stock. Broadcom also dished out $9.2 billion of cash dividends to shareholders.
It’s interesting that the firm’s capital return to shareholders (some $21 billion of dividends and stock repurchases) actually exceeded Broadcom’s huge free cash flow.
Looking at the stock’s balance sheet, Broadcom ran a $10 billion cash position and $1.9 billion of inventories as of Aug. 4, with total current assets at $19.9 billion.
Meanwhile, current liabilities added up to $19.2 billion -- including $3.1 billion of shorter-term debt and $9.8 billion of unearned revenue.
True, this technically put the firm's current ratio at 1.04, which would barely pass muster for many investors. However, once we adjust AVGO’s balance sheet for those $9.8 billion deferred revenues (which many investors don’t consider “true” liabilities), the current ratio rises to a much more comfortable 2.11.
Still, the company’s balance sheet has other potential issues if we dig a little deeper.
For example, Broadcom’s total assets amount to $168 billion, but that includes $140.9 billion of goodwill and other intangibles -- 84% of the total. That's very high by Wall Street standards.
Separately, total liabilities less equity came to $102.3 billion. That includes $66.8 billion of long-term debt, which looks a bit heavy relative to the company’s cash position.
All in, the fundamentals tell me investors might approach this stock with a certain level of caution.
Broadcom’s Technical Analysis
Here’s AVGO’s chart since early 2024, which also says “buyer beware” in some ways:
Readers will see that the stock has formed a large “double-top reversal” pattern, as denoted by the two pyramids shaded in red. This is traditionally a pattern of bearish reversal.
AVGO’s double-top has a $128 pivot point (the nadir between the two pyramids’ peaks).
Since forming this pattern, Broadcom has moved sideways of late -- but neither created a new top nor tested the double top’s $128 low. So, the pattern looks like it’s still valid. Again, that could be a bearish sign.
Meanwhile, readers will also see that in November, Broadcom’s 21-day Exponential Moving Average (or “EMA,” denoted with a green line above) crossed below the stock’s 50-day Simple Moving Average (or “SMA,” marked with a blue line).
This is a signal that veteran swing traders sometimes to get out of or avoid long-side trades. (Other swing traders use shorter moving averages.)
Still, note that Broadcom’s Relative Strength Index (the gray line at the chart’s top) is almost perfectly neutral.
Meanwhile, the stock’s daily Moving Average Convergence Divergence indicator (or “MACD,” denoted by black and gold lines and blue bars at the chart’s bottom) has improved, but isn’t really positive just yet.
Within that MACD, the histogram of Broadcom’s 9-day EMA (marked blue bars) has crossed above zero. That’s historically a positive sign.
The stock’s 12-day EMA (the black line) has similarly crossed above the 26-day EMA (the gold line). That’s also typically positive.
However, both the 12- and 26-day EMAs are still below zero – a potentially negative sign. In fact, some traders consider that reason enough alone to avoid longer-term trades in a stock with such a reading.
All in all, I personally think there are enough concerns to show caution with Broadcom going into next week’s earnings report. Personally, I have no position in the stock.
(Stephen “Sarge” Guilfoyle is Moomoo Technologies Inc.’s markets commentator.)
This article discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material.
Moomoo and its affiliates make no representation or warranty as to the article's adequacy, completeness, accuracy or timeliness for any particular purpose of the above content. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct. Moomoo is a financial information and trading app offered by Moomoo Technologies Inc. In the U.S., investment products and services on Moomoo are offered by Moomoo Financial Inc., Member FINRA/SIPC.
TradingView is an independent third party not affiliated with Moomoo Financial Inc., Moomoo Technologies Inc., or its affiliates. Moomoo Financial Inc. and its affiliates do not endorse, represent or warrant the completeness and accuracy of the data and information available on the TradingView platform and are not responsible for any services provided by the third-party platform.
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