Mizuho Maintains Outperform on Broadcom, $410 Price Target

Mizuho analyst Vijay Rakesh reiterated an Outperform rating and $410 price target on Broadcom Limited (NASDAQ: AVGO).

“We caught up with AVGO management.

On some key investor concerns: 1) for Customer 4 (we believe OAI), the $10B we believe will be from “AI Racks” with non-ASIC/Networking costs passed through and conservatively, no margin stacking; 2) we believe much of ASIC HBM shipments already passed through, 3) assuming XPU/Networking ~80% of BOM and OAI “AI Rack” revenues of $10-24B in F26-F28E, our back-of-envelope GM dilution estimates for F26E ~166bps, F27E ~224bps, and F28E ~286bps, with EPS impact LIMITED at ~$0.24-$0.61 (3-4% -ve); 4) That said, we believe OAI could see a FASTER Titan ramp in F27/28E as majority of its XPU team is ex-TPU (LINK), with leverage as racks are outsourced to CM/ODMs.

Reiterate Outperform, PT $410.

Separately, we adjust estimates to reflect GM/EPS impacts, and are BUYERS on the recent pullback: AVGO remains King of AI Custom Silicon with accelerating ASIC revs and broadening engagement.”

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