Analyst Eyes 38% Upside for AVGO Stock After Earnings

The Apple supplier reported third-quarter earnings and revenue beats

The shares of Broadcom Inc (NASDAQ:AVGO) are up 4.7% this morning at $237.85 -- putting them on track for their biggest one-day gain since Sept. 7 -- after the Apple supplier reported adjusted third-quarter earnings of $5.85 per share on $5.44 billion in revenue, more than analysts were expecting. Citing strong data center demand for its enterprise storage and networking products, Broadcom also gave stronger-than-forecast full-year revenue guidance.

Analysts have been quick to chime in after Broadcom earnings, and most of the attention has been positive. Jefferies, for instance, joined no fewer than four analysts in raising its AVGO price target -- to $314 from $278, a 38% premium to last night's close -- saying AVGO looks like a "capital return play." Elsewhere, Evercore ISI called out an attractive risk/reward profile. On the flip side, Morgan Stanley lowered its price target on the chip stock to $250 from $260.

More broadly speaking, most analysts are already bullish on AVGO stock, with 22 of 28 maintaining a "strong buy" rating -- and not a single "sell" on the books. Plus, the average 12-month price target sits all the way up at $291.32.

Options traders, on the other hand, have been more bearish than usual toward Broadcom. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.79 ranks in the 81st annual percentile, meaning puts have been bought to open relative to calls at a faster-than-usual clip.

Looking at the charts, AVGO shares have been volatile in recent months, per their annual high 120-day historical volatility of 39.4%. This price action has been contained between the $250 and $200 neighborhoods, though, home to the stock's mid-July pre- and post-bear gap levels, respectively. More recently, Broadcom has struggled against its 200-day moving average, and is trading back near this trendline thanks to today's post-earnings pop.