Should You Buy AVGO Stock At $230?

Core Viewpoint - Broadcom's stock has increased nearly 45% in the last six months, significantly outperforming the Nasdaq index, which is down 1%. This growth is primarily driven by a 40% increase in sales over the past year, particularly from its AI product line, which saw a 220% year-over-year revenue increase to $12.2 billion in fiscal year 2024 [1][2]. Revenue Growth - Broadcom's revenues have grown from $39 billion to $55 billion in the last 12 months, reflecting a 40.3% increase compared to a 5.5% growth for the S&P 500 [6]. - The company has achieved an average revenue growth rate of 24.7% over the last three years, significantly higher than the S&P 500's 5.5% [6]. Profitability - Broadcom's operating income over the last four quarters was $19 billion, resulting in an operating margin of 34.3%, compared to 13.2% for the S&P 500 [6]. - The company's net income for the last four quarters was $10 billion, indicating a net income margin of 18.5%, which is higher than the S&P 500's 11.6% [6]. Financial Stability - Broadcom's balance sheet is strong, with a debt figure of $67 billion and a market capitalization of $1.1 trillion, resulting in a low debt-to-equity ratio of 6.0% compared to 19.9% for the S&P 500 [10]. - Cash and cash equivalents amount to $9.3 billion out of $165 billion in total assets, yielding a cash-to-assets ratio of 5.6%, lower than the S&P 500's 13.8% [10]. Downturn Resilience - AVGO stock has shown less resilience than the S&P 500 during recent downturns, with significant declines during market crashes [8][11]. - Despite its high valuation, Broadcom's strong sales growth and solid operating cash flow margins make it an attractive investment [9].