AI in Focus Ahead of Broadcom’s Earnings Release

Broadcom Inc. (NASDAQ: AVGO) is scheduled to report its first-quarter earnings after the market closes today, March 7, 2024. The company has enjoyed a remarkable run over the past year, appreciating over 112%, and is currently up over 23% year-to-date. This strong performance reflects the company’s solid financial position, driven by its diverse product portfolio and exposure to high-growth markets like AI. 

Analysts expect Broadcom to report earnings of $10.37 per share on revenue of $11.795 billion for the first quarter of 2024. Positive earnings that meet or exceed expectations, particularly with solid guidance and commentary on AI, could further fuel the share price rally. Beyond the immediate results, investors are particularly interested in Broadcom’s outlook, especially regarding its Artificial Intelligence (AI) segment. The company is considered a leader in the “AI5” group of stocks, which are expected to benefit from the growing adoption of AI technologies. 

The anticipation is not without merit. Broadcom’s recent announcement of the world’s first 5nm PCIe Gen 5.0/CXL2.0 and PCIe Gen 6.0/CXL3.1 retimers marks a significant milestone, showcasing its leadership in connectivity technology and commitment to advancing AI data center solutions. This innovation is expected to enhance server performance, a critical factor as AI applications demand increasingly high bandwidth and low latency. 

Technical Analysis 

Broadcom’s share price is currently trading slightly lower within an ascending channel pattern, exhibiting short-term consolidation ahead of the earnings release. The share price sits comfortably above all three key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], indicating a long-term bullish trend. Additionally, the RSI (62.31) sits above 50, signifying positive momentum. 

With the company releasing their earnings results after the bell today, positive results could push the price higher, with the all-time high of $1438.17 acting as the initial level of resistance higher. Excellent earnings coupled with a positive outlook, especially on AI, could propel the share even higher, with the 23.60% Fibonacci extension level ($1,494.29) and 38.20% % Fibonacci extension level ($1,529.00) acting as the next levels of significance. 

Conversely, disappointing results could see a swift decline towards the 23.60% Fibonacci retracement level ($1,286.40). A significant break below this level, accompanied by high volume, could trigger further selling pressure towards the 38.20% ($1,192.51) and 50.00% ($1,116.63) Fibonacci retracement levels. 

Summary 

Broadcom’s solid fundamentals and positive technical setup suggest a potentially bullish outlook post-earnings. A positive earnings report, coupled with optimistic guidance on the AI segment, could propel the share price towards resistance levels at $1,438.17 and beyond. However, a disappointing report could trigger a pullback, with initial support at $1,286.40.  

Sources: TradingView, Benzinga, Dow Jones Newswires, Reuters, Investor’s Business Daily. 

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst 

Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.

Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.

CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.