Is There Still Room for Broadcom After Its Surge Past $1 Trillion Market Cap?

If you have been eyeing Broadcom’s stock lately, you are definitely not alone. The past year has been a whirlwind for AVGO, with the share price up more than 77% over the last twelve months. Even looking back over a longer stretch, it is hard not to be impressed: over the last five years, Broadcom’s total return has soared more than 860%. This kind of performance captures investors’ attention and prompts some big questions. Has the market gotten ahead of itself, or is there still value left in this semiconductor giant?

In the past ninety days, Broadcom stock has climbed over 26%. That substantial jump reflects both company-specific optimism and a renewed focus on artificial intelligence and chip infrastructure. On the other hand, it is worth noting the last week saw a short pullback, with shares down about 5.8%. Quick moves like these can signal shifting risk perceptions, new information, or simply the market’s short-term volatility playing out in real time.

What about valuation? According to our system of six main checks for undervaluation, Broadcom currently does not register as undervalued in any area. This gives it a valuation score of 0. That might sound surprising given all the headline growth, but it highlights the importance of looking closely at how investors assess the company. Let us break down what goes into these valuation checks and why, before you take any action, it might be worthwhile to consider alternative ways to judge Broadcom’s worth.

Broadcom delivered 77.6% returns over the last year. See how this stacks up to the rest of the Semiconductor industry.

Approach 1: Broadcom Cash Flows

A Discounted Cash Flow (DCF) model allows investors to estimate what a company is really worth by projecting the business’s future cash flows and then discounting those flows back to their present value. This method is designed to cut through market noise and identify the intrinsic value based on how much cash the business will actually generate.

Looking at Broadcom’s numbers, the company recently generated free cash flow of $22.6 billion over the last twelve months. Analysts expect these figures to climb, projecting annual free cash flow to reach as high as $86.1 billion by 2035, driven by ongoing adoption of AI and continued expansion in chip infrastructure. Ten-year projections suggest steady growth, with estimates for 2029 indicating $64 billion in free cash flow.

Plugging these numbers into a DCF model, Broadcom’s estimated intrinsic value is $179.94 per share. When compared to today’s stock price, this suggests Broadcom is 61.8% overvalued according to this calculation. In simple terms, the current market price is above what the cash flows would justify, indicating a degree of market optimism is currently priced into AVGO shares.

Result: OVERVALUED

Our DCF analysis suggests Broadcom may be overvalued by 61.8%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Broadcom Price vs Earnings (P/E)

The Price-to-Earnings (P/E) ratio is a classic and widely trusted valuation tool, particularly for profitable companies like Broadcom. It helps investors understand how much they are paying for each dollar of earnings, making it a straightforward way to benchmark whether a stock is priced reasonably in relation to its profitability.

Generally, companies with strong growth prospects or lower perceived risk will trade at higher P/E ratios, as investors are willing to pay a premium for future earnings potential. In contrast, elevated risk or muted growth prospects typically pull the P/E down. This context is important, as what is considered a "normal" or "fair" P/E varies across industries and depends on factors like company growth, profit margins, and overall sentiment.

Currently, Broadcom trades at a P/E ratio of 103.43x, which is far above both the semiconductor industry average of 28.33x and its peer group average of 47.37x. For additional perspective, the Simply Wall St "Fair Ratio" for Broadcom is calculated at 59.08x, taking into account its specific growth outlook, financial health, and industry risk profile. When comparing Broadcom’s current P/E to this fair level, shares appear richly valued and are priced at a clear premium to what would be considered justified based on fundamentals alone.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Broadcom Narrative

While traditional valuation methods like P/E ratios and DCF models focus on crunching numbers, Narratives go a step further by letting you connect your story or perspective about Broadcom directly to its financial future. This approach ties together your own assumptions for revenue, margins, and fair value.

A Narrative gives you the power to link what you believe about Broadcom’s growth drivers, such as AI innovation, customer expansion, or new business models, to a quantitative forecast and a price you think is fair. This makes investing more personalized, intuitive, and dynamic.

On Simply Wall St, Narratives are simple to use and widely adopted across our global investor community. They provide a transparent space to compare and refine forecasts while factoring in your personal view of Broadcom’s risks and opportunities.

Because Narratives update in real time when new earnings reports or news are released, your decisions remain relevant. This helps you compare what you think Broadcom is worth (Fair Value) to the live share price, supporting your decision to buy, hold, or sell.

For example, some investors see Broadcom’s future as bright, forecasting a fair value near $400, while others take a much more cautious view, estimating just $210. This demonstrates how Narratives reflect diverse, dynamic outlooks on the same company.

Do you think there's more to the story for Broadcom? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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