Broadcom (AVGO) stock rose 3% in Monday’s extended hours trading, as the semiconductor company announced a $10 billion new stock buyback plan, reinforcing management’s confidence in the future growth. The new share repurchase plan will be valid through December 31, 2025.
Broadcom’s Buyback Plan Reflects Confidence in Its Growth Prospects
Hock Tan, Broadcom’s President and CEO, believes that the $10 billion share buyback program reflects the board’s confidence in the company’s diversified semiconductor and infrastructure software product businesses.
Tan added that Broadcom is uniquely positioned in “mission critical infrastructure software and enabling hyperscalers to drive innovation in generative AI.” He also thinks that the buyback plan indicates the board’s confidence in AVGO’s robust cash flow generation, which allows the company to enhance shareholder returns.
Companies often announce buyback plans to reduce the number of shares outstanding and boost their earnings per share (EPS). Moreover, management uses buybacks as a measure to indicate that they find the stock to be undervalued, given the company’s solid growth potential. Broadcom stock has declined 33.5% year to date amid tariff wars, chip export restrictions, and growing competition.
Is AVGO a Good Stock to Buy Now?
Despite the ongoing challenges, Wall Street is highly bullish on Broadcom stock due to the demand for the company’s custom AI processors, or ASCI (application-specific integrated circuits), and infrastructure software. The company witnessed a 77% rise in its AI revenue to $4.1 billion in Q1 FY25.
AVGO stock scores a Strong Buy consensus rating based on 23 Buys and two Hold recommendations. The average Broadcom stock price target of $250.90 implies about 63% upside potential. AVGO stock offers a dividend yield of 1.5%.
