Broadcom Earnings Preview: AI Demand, Guidance, and an 8.6% Expected Move
Broadcom Earnings Preview: AI Demand, Guidance, and an 8.6% Expected Move
- Broadcom is scheduled to report earnings on Wednesday, June 3, after the market close.
- The stock continued its surge higher a day before the earnings report after a big analyst upgrade.
- Options on the stock show an expected move of +/- 41.62 points.
Broadcom earnings to provide market with another signal on the AI trade
Broadcom (AVGO) is scheduled to report quarterly earnings results on Wednesday, June 3, after the market close.
The stock price continued to rise a day ahead of its earnings report after Oppenheimer reiterated a buy rating on the stock with a $450 price target. The analysts cited strong AI demand that will likely translate into a beat on earnings and upgraded guidance.
The stock was already rising before the analyst upgrade after a series of results accelerated speculative buying in the AI trade. Companies that produce chips, like Broadcom, have been one of the biggest beneficiaries of the bullish narrative on the AI trade.
Traders have little reason to turn away from the AI trade after strong results from companies that produce chips and are heavily integrated into the technology. Dell reported recently and investors sent the stock surging higher. If we go off of companies like Dell, then there is little reason to believe that AI demand is fading.
In fact, the AI trade is being constrained by supply, not demand. This is good news for profit margins, as a supply shortage in the chain gives more pricing power to providers of AI infrastructure.
Hyperscalers continue to race toward building out infrastructure and despite supply being constrained at the GPU layer, investment around the surrounding stack remains strong. Broadcom’s revenue guidance, especially around AI, will be key for the stock’s reaction.
According to TradingView, analysts expect Broadcom to report earnings per share (EPS) of $2.40 on $22.13 billion in revenue. Last year, EPS came in at $1.58 on $15 billion in revenue.
Trading Broadcom earnings
Options on Broadcom show an expected move of +/- 41.62 points, or about 8.6% of Tuesday’s 481.68 price. That is on the upper end of the 5% to 10% range that S&P 500 companies typically see post earnings.
If Broadcom moves to the lower bound of that expected move it would put prices around the upper range of its consolidation pattern that it formed in May. To the upside, it would be push prices into record high territory, so there isn’t any notable resistance. The implied volatility rank (IVR) was at 81.2 as of Tuesday, June 2.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
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