Broadcom share price declined sharply on Friday, with a selloff sending it nosediving, despite strong earnings figures. The share price closed the day down by 10.3 percent as investors chose to focus on the fourth-quarter earnings outlook. Broadcom (NASDAQ: AVGO) generated $13.07 billion in sales for the quarter ending August 4th, beating analysts’ forecast figure of $12.89 billion and resulting in an EPS of $1.22.
However, despite the positive revenue growth, Broadcom incurred a loss of $1.875 billion, attributed to acquisition costs, compared to the Q3 2024 profit of $3.3 billion. Broadcom acquired VMware for $69 billion in November 2023, and the acquisition contributed significantly to the latest earnings.
That said, the decline in the share price was not a reflection of the company’s baseline, but a reaction to the Q4 outlook and a general negative market contagion seen in the last week amidst renewed concerns over the US economy. The company adjusted its earnings forecast from AI chips by $1 billion to $12 billion from the last quarter’s figures, signaling a positive outlook for the near-term.
Despite a mostly-successful third quarter, the company’s fourth quarter guidance projected revenue of $14 billion, which fell short of LSEG analysts’ forecast of $14.04 billion. This will put AVGO under pressure in the near-term.
That said, Broadcom reported $5.8 billion in infrastructure software revenue, an increase of 200 percent over the year-ago quarter, with the growth attributed to the VMware acquisition. That points to a broader success of the acquisition, despite the net loss attributed to it in Q3 2024. Broadcom share price was up by 1.4 percent in Monday’s pre-market session to trade at $138.03, to signal a potential near-term reversal.
Broadcom share price has its pivot around the 138.35 mark, and will need to stay above that level to maintain the upside momentum. In that case, the first resistance will likely be at 139.70. However, if the buyers extend their control, they could break above the resistance to test 141.76.
On the other hand, a break below the 138.35 level will put the sellers in control, with the first support likely to be at 137.15. However, extended bearishness could strengthen the downward momentum to break the first support and test 136.00.
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