Broadcom (AVGO) has finally closed its acquisition of VMware (VMW) after a year-and-a-half since it was originally announced in May 2022. The newly combined company is a juggernaut in computing infrastructure and software, and a unique stock. The new Broadcom is almost a fifty-fifty split between semiconductors and cloud and enterprise software.
But is Broadcom stock really a buy now that it owns VMware? Chip Stock Investor breaks down the financials, and explains how Broadcom’s sprawling chip and cloud software business is organized and managed. Nick and Kasey also discuss an important valuation metric using enterprise value and free cash flow, and what Broadcom’s key priority will be in the next couple years. Additionally, they explain why Broadcom stock may not be the value it was a year ago when they were buying it last.
And finally, they take a look at the implications of Broadcom’s high level of debt. Over two years ago, Nick called out similarities between Intel (INTC) and IBM of the 2010s, and early in 2023 discussed mounting headwinds for Texas Instruments (TXN). Now, he’s calling out a potential issue that Broadcom investors should be mindful of. Is Broadcom becoming the next General Electric (GE)? That may be a premature call, but investors interested in or invested in Broadcom should be aware of new risks after the VMware purchase.
Don’t miss this important episode of Chip Stock Investor!
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What to watch/read next:
Neutron Jack: https://www.npr.org/2022/06/01/1101505691/short-term-profits-and-long-term-consequences-did-jack-welch-break-capitalism
https://youtu.be/FOInB7SkFQE
https://youtu.be/iN0QVpn4h2E
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Content in this video is for general information or entertainment only and is not specific or individual investment advice. Forecasts and information presented may not develop as predicted and there is no guarantee any strategies presented will be successful. All investing involves risk, and you could lose some or all of your principal.
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Nick and Kasey own shares of Broadcom.
