Broadcom: XPU Growth Trajectory Underestimated, Stock A Bargain

Michael Fitzsimmons 23.55K Followers Follow Summary After last year's 80%+ total return, Broadcom stock has significantly lagged the broad semiconductor sector on a YTD basis. However, the market is underestimating the rapid growth trajectory of the company's XPU business. Meanwhile, in the upcoming Q3 report (due Sept 2), its high-margin software segment is expected to grow revenue 30%+. Broadcom has built a wide moat around its businesses, has a very strong free cash flow profile, and is one of the best dividend growth stocks in the entire S&P 500. I am increasing my free cash flow estimates for FY26 and FY27, increasing my 12-month price target from $550 to $600, and reiterating my Strong Buy rating. Xpu-ha Beach Riviera Maya Mexico Beautiful beach with a clear blue ocean and palm trees in the background. Isabella Biava/iStock via Getty Images Year-to-date, my #1 pick in the technology sector - Broadcom Inc. ( AVGO ) - has not only This article was written by Michael Fitzsimmons 23.55K Followers Follow Michael Fitzsimmons is a retired electronics engineer and avid investor. He advises investors to construct a well-diversified portfolio built on a core foundation of a high-quality low-cost S&P500 fund. For investors who can tolerate short-term risks, he advises an over-weight position in the technology sector, which he believes is still in the early stages of a long-term secular bull-market. For dividend income, and as a 4th generation oil & gas man, Fitzsimmons suggests investors consider a position in large O&G companies that provide strong dividend income and dividend growth. Fitzsimmons' articles on portfolio management recommend a top-down capital allocation approach that is aligned with each individual investor's personal situation (i.e. age, retired/working, risk tolerance, income, net worth, goals, etc) and might include allocations into investment categories such as the S&P500, technology, dividend income, sector ETFs, growth, speculative growth, gold, and cash. Analyst’s Disclosure: I/we have a beneficial long position in the shares of AVGO, GOOG, NVDA, SMH, XLK, VOO, DIA, QQQ either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I am an electronics engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.