It may seem like a bizarre observation in the context of 14% year-over-year revenue growth and 63% booking growth in the last quarter, but Broadcom (AVGO) really isn’t that well-suited to this bullish growth cycle in chip stocks. Broadcom management certainly cares about and nurtures growth opportunities, but this name was among the first chip companies to really appreciate that margins drive long-term value, and that margin focus usually serves Broadcom better in periods of weaker sentiment.

Be that as it may, Broadcom is looking at major growth opportunities in 2021, including the next generation of Apple (AAPL) 5G iPhones, 400G networking with data center customers (including hyperscale customers), custom ASIC with AI and wireless infrastructure opportunities, and a Wi-Fi 6 upgrade cycle. With those drivers in place, Broadcom could generate a mid-teens near-term return and high single-digit long-term annualized returns.

 

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Broadcom: Abundant Growth And Margin Opportunities Could Push Shares Higher