Analysts have revised their revenue estimates for Broadcom Inc (AVGO), boosting its value by +33% since last earnings release on Dec 12, 2024. The stock is now trading at $239.62.
Strong Free Cash Flow Margins and Higher Valuation
Revised analysts’ revenue estimates for FY 2025 and FY 2026 have increased, indicating higher revenue growth. Using a free cash flow margin of 40%, Broadcom’s estimated FCF over the next 12 months is $26.3 billion, leading to a potential market value of $1.315 trillion.
This represents a +17.22% increase from today’s market cap and a potential price of $280.83 per share, according to one analyst. One strategy to profit from this is by selling short out-of-the-money put options, offering an attractive yield with minimal downside risk.
For example, selling the Jan. 24, 2025 expiry puts at the $220.00 strike price can provide a short-put yield of 1.636% for less than one month investment. Existing investors in AVGO can also benefit from this strategy by making a profit while waiting to potentially lower their average cost.
However, there are some risks involved, including the potential for unrealized losses if the stock falls below $216.40. Nevertheless, selling short out-of-the-money put options remains an attractive option for those looking to capitalize on Broadcom’s potential value growth.
Source: https://www.barchart.com/story/news/30220068/broadcom-estimates-are-rising-pushing-up-avgo-stock-s-value-good-for-otm-short-put-plays