Broadcom (AVGO) Stock: Why This Analyst Says Buy the Dip After 15% Drop

TLDR

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Wells Fargo upgraded Broadcom (AVGO) to “Overweight” following a 4.2% stock decline on January 14
The firm increased 2026 revenue forecasts to $100.3 billion and 2027 estimates to $143.8 billion
AI semiconductor revenue expected to grow 116% in 2026 to $52.6 billion and 78% in 2027 to $93.4 billion
Broadcom’s Q4 fiscal 2025 results beat expectations with 28% revenue growth and 74% AI semiconductor revenue surge
Wall Street consensus rating is “Strong Buy” with mean price target of $455.22, representing 29% upside potential

Broadcom stock fell 4.2% on January 14 as investors processed several concerning developments. Chinese software restrictions, a major debt offering, and large insider sales combined to pressure shares lower.

Broadcom Inc., AVGO

Wells Fargo took a different view. The firm upgraded Broadcom from “Equal-weight” to “Overweight,” arguing the pullback created an attractive entry point.

Analyst Aaron Rakers highlighted increasing visibility into 2026 catalysts. The upgrade reflects growing confidence in Broadcom’s strategic position, particularly its deepening partnership with Alphabet on tensor processing units.

Wells Fargo backed up the upgrade with higher numbers. The firm raised 2026 revenue estimates from $97 billion to $100.3 billion. Earnings per share projections climbed from $10.36 to $10.80.

The 2027 outlook grew even more optimistic. Revenue forecasts jumped to $143.8 billion from $130.5 billion. EPS estimates rose from $13.90 to $15.35.

AI Semiconductor Business Fueling Growth

The upgraded forecasts rest on explosive AI semiconductor growth. Wells Fargo now projects this segment will generate $52.6 billion in 2026, up 116% year-over-year.

By 2027, AI semiconductor revenue could reach $93.4 billion. That would represent 78% growth as hyperscale demand continues expanding.

Recent results support the bullish case. Broadcom reported Q4 fiscal 2025 earnings on December 11 that crushed Wall Street expectations.

Revenue grew 28% to $18.02 billion, beating estimates of $17.5 billion. Adjusted earnings per share hit $1.95, topping the $1.87 consensus.

AI semiconductor revenue surged 74% in the quarter. The performance exceeded even Broadcom’s own guidance, demonstrating stronger-than-expected customer demand.

Infrastructure software also delivered. The VMware segment posted 19% revenue growth, accelerating from the prior quarter despite ongoing customer concerns about pricing.

Analyst Targets Rise Across Wall Street

Wells Fargo raised its price target to $430 from $410. Mizuho analyst Vijay Rakesh went higher, lifting his target from $450 to $480 while maintaining an “Outperform” rating.

Oppenheimer’s Rick Schafer kept a buy rating with a $450 target. Barclays issued a buy rating on January 16 as well.

The consensus tells a clear story. Of 42 analysts covering Broadcom, 36 rate it “Strong Buy,” three say “Moderate Buy,” and three recommend “Hold.”

The mean price target of $455.22 implies 29% upside. The highest target of $535 suggests potential gains of 52%.

Management guided for Q1 fiscal 2026 AI semiconductor revenue to double year-over-year to $8.2 billion. Total revenue guidance came in at $19.1 billion with 67% adjusted EBITDA margins.

Cash and equivalents reached $16.2 billion at quarter-end, up from $10.7 billion previously. Analysts expect full-year 2026 earnings to climb 49% to $8.39, followed by another 46% increase in fiscal 2027 to $12.23.

The stock trades at 40.8 times forward earnings and 25.5 times sales. Both metrics exceed industry averages and Broadcom’s five-year historical multiples.

Broadcom has raised its dividend for 15 straight years. The current annual payout is $2.60 per share, yielding 0.76%. Insider sentiment turned negative recently, with Chief Legal Officer Mark David Brazeal selling 30,000 shares for $10.4 million this month.

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