In a compelling analysis on Friday, CNBC’s Jim Cramer encouraged investors to seize the opportunity presented by the recent sell-off in Broadcom’s stock following its earnings report. He characterized the company as “on fire,” highlighting its impressive portfolio of high-profile clients, including tech giants like Alphabet, Meta Platforms, TikTok, and Anthropic.
Despite Broadcom delivering strong quarterly results and raising its guidance on Thursday evening, the stock plummeted nearly 11% the next day. This sharp decline was attributed to misinterpretations of remarks made during the earnings call, coupled with the high expectations investors had built up leading into the earnings release. Cramer suggested that some profit-taking might also have contributed to the downturn.
During the earnings call, concerns emerged regarding Broadcom’s partnership with Alphabet, especially about a potential shift where customers might opt to develop custom chips in-house. CEO Hock Tan’s response to questions about this possibility did not fully reassure investors. Concerns were further exacerbated by comments from CFO Kirsten Spears, who indicated that margins could shrink in the second half of the year due to increased costs from components not owned by Broadcom.
Cramer dismissed these concerns, framing them as buying opportunities rather than reasons for alarm. He asserted that the potential for lower margins is outweighed by the prospect of increased business volume, which could include new customers.
Following the earnings call, the CNBC Investing Club maintained a hold-equivalent rating on Broadcom, adjusting its price target upward by $10 to $425 per share. The company’s stock had recently reached a record closing high of $413, which was close to the previous price target. Both Broadcom and Meta are part of the CNBC Investing Club’s curated portfolio, underscoring their strategic value.
