In this piece, I evaluated two chipmaker stocks, Broadcom (AVGO) and Arm Holdings (ARM), using TipRanks’ Comparison Tool to see which is better. A closer look suggests a bullish view of Broadcom and a bearish view of ARM stock.
While both companies make semiconductors for various applications, U.S.-based Broadcom focuses on data centers, artificial intelligence, wireless and broadband, networking, software, and industrial markets. Meanwhile, U.K.-based Arm Holdings focuses on central processing units (CPUs), graphics processing units (GPUs), neural processing units (NPUs), and interconnect technologies.
Broadcom just went through a 10-for-one stock split, so on some sources, it may have initially looked like the stock price suddenly plunged, but that wasn’t the case. The price is now roughly 10% of where it was trading at the closing bell last Friday.
Broadcom stock has actually soared year-to-date, rising from about $1,077 on January 1 to $1,700 on Friday before the stock split. On a split-adjusted basis, the shares are up 44% year-to-date and 82% over the last year. Meanwhile, Arm Holdings stock is up 116% year-to-date and 167% over the last year.
In general, chipmaker stocks have been soaring this year as evidenced by both companies’ year-to-date returns. However, a closer look is needed to see whether Arm’s much-larger return is warranted. We’ll compare their price-to-earnings (P/E) ratios to gauge their valuations against each other and that of their industry.
For comparison, the semiconductor industry is trading at a P/E of 61x versus the three-year average of 35.5x.
Broadcom (NASDAQ:AVGO)
At a P/E of around 68x, Broadcom is trading at a relatively small premium to the broader industry (for reference, Nvidia’s (NVDA) trailing 12-month P/E is around 70x, almost in line with Broadcom’s). However, AVGO’s forward P/E of 29.3x is even more attractive. Thus, a long-term bullish view may be appropriate — with the caveat that more volatility could be around the corner.
This week brought significant volatility, as…
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