Broadcom’s (AVGO) recent completion of its acquisition of VMware is expected to have a positive impact on the company’s stock performance, according to Wall Street analysts. The chipmaker’s stock witnessed an uptick on Friday following the completion of the deal.
Based in San Jose, California, Broadcom successfully closed its acquisition of Palo Alto-based VMware on Wednesday after receiving conditional approval from China’s State Administration for Market Regulation. The deal, initially announced in May 2022, faced delays due to an extended review by Chinese regulators.
Broadcom, known for its diversified technology offerings in semiconductors and infrastructure software solutions, now owns VMware, a company specializing in cloud computing management and networking software.
KeyBanc Capital Markets analyst John Vinh maintained his overweight rating on AVGO stock and raised the price target from 1,000 to 1,200. On the stock market, AVGO climbed 0.7%, closing at 978.87.
Vinh anticipates the acquisition to have an immediate positive impact on Broadcom’s gross profit margin and earnings per share.
Broadcom’s stock is considered a technology leader, listed on the IBD Tech Leaders roster. Despite a pullback in October following its third failed breakout in four months, AVGO stock recovered to reach a record high of 999.87 on Monday.
The VMware acquisition, valued at about $83 billion due to Broadcom’s stock appreciation since the deal’s announcement 18 months ago, is expected to enhance Broadcom’s software sales. According to Evercore ISI analyst Matthew Prisco, Broadcom’s software sales are projected to constitute about 40% of its total revenue in the first year post-close, up from 20% pre-acquisition. Prisco, with an outperform rating, set a price target of 1,050 for AVGO stock.
Broadcom CEO Hock Tan referred to the VMware acquisition as “another important step forward in building the world’s leading infrastructure technology company” in a news release.
As AVGO stock continues to show resilience, the next potential catalyst could be Broadcom’s fiscal fourth-quarter earnings report scheduled for December 7. Investors are keen to observe the impact of the VMware acquisition on Broadcom’s financial performance.
