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Broadcom stock split: AVGO shares tipped for split despite price weakness, pending VMWare acquisition

By Manaswita Ghosh Dutta

Edited by Vanessa Kintu

15:29, 11 November 2022

Exterior of a Broadcom facility in Silicon Valley
Broadcom is a San Jose, California-based semiconductor manufacturing company Photo: iQoncept / Shutterstock

Broadcom (AVGO) may have plunged nearly 30% in 2022, but shares in the designer of networking and communication semiconductors have recorded long-term gains. 

AVGO stock has returned more than 2,800% since its initial public offering (IPO) in August 2009. Additionally, the company’s promising revenue growth puts it on investors’ radar. Broadcom has generated double-digit revenue growth for seven consecutive quarters as of its Q3 2022 ended 31 July.

Broadcom (AVGO) live price chart

Broadcom’s pending acquisition of Palo Alto, California-based cloud computing company VMware (VMW) only adds to its attractiveness for investors. But is an AVGO stock split likely? Read on to know more about if a Broadcom stock split is possible ahead.

What is Broadcom?

Broadcom is a San Jose, California-based semiconductor manufacturing company that designs, develops and manufactures a diverse range of semiconductor and infrastructure software products. 

The company’s semiconductor portfolio includes data centre switches and routers, filters and amplifiers, wireless connectivity solutions, and fibre optic solutions. Its infrastructure software portfolio includes enterprise solutions for building, connecting, managing and securing complex digital environments. 

Shares in the company trade on the Nasdaq under the ticker AVGO. Broadcom stock went public on 6 August 2009 under its predecessor company named Avago. 

Broadcom’s financial year ends on 29 October.

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Broadcom stock analysis: Historical view

AVGO 5-year price chart

Source: The Capital.com Group

Past performance is not a reliable indicator of future results.

Over the past five years, the Broadcom stock price has surged more than 77%, as of 10 November, 2022. In the same time, the Nasdaq Composite, where the stock is listed, has gained over 57%.

The stock surged to an all-time high of $658.71 on 27 December 2021, while the 52-week high stock price was $677.76.

Year-to-date (YTD), shares of Broadcom declined 29%, marking a lesser decrease than that of Nasdaq, which lost 34% during the period, owing to the continuing macroeconomic headwinds.

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Broadcom to acquire VMware

Earlier in November, Broadcom approved the acquisition of VMware in a $61bn cash and stock deal. The takeover is expected to close in Broadcom’s fiscal year 2023, which ends on 29 October 2023.

Broadcom will pay $142.50 in cash for each VMware share or 0.2520 shares of its common stock. The acquisition is subject to regulatory approvals and customary closing conditions, which include the approval by VMware shareholders.

After the acquisition is complete, the Broadcom Software Group will rebrand and operate as VMware, which will incorporate Broadcom’s existing infrastructure and security software solutions as part of an expanded VMware portfolio.

Fitch Ratings affirmed the long-term 'BBB-' and short-term 'F3' ratings for Broadcom. and the 'BBB-' long-term ratings for its wholly-owned subsidiary Broadcom Technology, the agency said in a statement released 1 June. The rating was based on Fitch Ratings’ expectation of the successful closure of the VMware acquisition deal.

Fitch expects that Broadcom will bring credit metrics back in-line with the 'BBB-' rating in the 12-24 months after the deal’s closure.

Will the AVGO stock split?  

Though Broadcom has no stock split history, its 2,800% gain since its 2009 IPO puts the company in line for an AVGO stock split. 

If the Broadcom stock splits this year, it may put the stock on par with other prominent splits that took place earlier this year, such as Amazon (AMZN), Alphabet (GOOGL), Shopify (SHOP), Tesla (TSLA) and Palo Alto Networks (PANW).

What is a stock split? A stock split can be defined as a scenario where a company raises the number of its shares while lowering the price of an individual share. This does not affect the company’s market capitalisation, but the lower price can lead to higher liquidity and raise investors’ interest.

For example, if a company’s shares are valued at $200 each and an investor owns 100 shares, their total investment is worth $20,000. If the firm splits its stock by two in a 2-for-1 stock split, the investor will own 200 shares worth $100 each. The value of the investor’s stock holding will remain unchanged.

Taking into account the company’s stock performance since its IPO, Violeta Todorova, senior research analyst at Leverage Shares, a leading issuer of Short and Leveraged ETPs, noted:

“From $16 at its first day of trading in August 2009, the stock had an incredible performance and delivered outstanding returns for investors over the past decade, with the price reaching an all-time high of $677 in December 2021. 

“Amid the recent stock splits in Amazon and Google investors are likely to be keen to hear about the next company considering this strategy. Stock splits do not change the financials of a company and a lower nominal share price makes the shares more affordable to small investors, also providing a psychological boost. 

“Despite the recent 30% decline from its December 2021 peak, the current share price of $467 might not be attractive for all retail investors. A stock split could help increase the stock's appeal once the market recovers and is something Broadcom might consider given the bloated share price. With a lower price initiated by a stock split, more investors are likely to be buying.”

Note that analysts can be wrong. Their forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading, looking at the latest news, a wide range of analyst commentary, technical and fundamental analysis on the stock. Keep in mind that past performance does not guarantee future returns. And never trade money that you cannot afford to lose.

FAQs

Is the Broadcom stock going to split?

Since its initial public offering (IPO) in 2009, Broadcom shares have gained over 2,800%, as of 10 November 2022. This puts the company in line for an AVGO stock split.

Did Broadcom have a stock split before?

Broadcom stock has not undergone a stock split before.

How many times has the Broadcom stock split?

None. The stock has never been split before.

Is the Broadcom stock good to buy?

MarketBeat had Broadcom stock as a ‘moderate buy’ based on the ratings by 24 analysts. Out of the 24, 22 analysts rated the stock a ‘buy’ and the remaining two a ‘hold’. The consensus price target for the stock was $672.83 as of 10 November, 2022.

However, how you invest is a personal decision depending on your risk tolerance and investing strategy. You should do your own research to take an informed view of the market and decide whether AVGO is an appropriate fit for your portfolio. Remember to never invest or trade more money than you can afford to lose.

Markets in this article

AVGO
Broadcom
155.96 USD
0.93 +0.600%
GOOGL
Alphabet Inc - A (Extended Hours)
176.83 USD
-4.22 -2.330%
AMZN
Amazon.com Inc (Extended Hours)
183.00 USD
-5.29 -2.810%
PANW
Palo Alto Networks
323.79 USD
-7.72 -2.330%
SHOP
Shopify Inc (US) (Extended Hours)
63.77 USD
-1.23 -1.900%

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You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
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