Following President Trump’s announcement of extensive tariffs on over 100 countries, Broadcom stock (NASDAQ:AVGO) stock fell by over 6% in after-hours trading on Wednesday. The announced tariffs include a significant 34% levy on imports from China, a major global manufacturing hub. While semiconductor goods are reportedly exempt from these specific tariffs, the broader macroeconomic consequences are a concern. The imposition of tariffs on Chinese products is expected to increase costs within the economy, potentially leading to slower economic growth or even a recession. This economic downturn could, in turn, reduce overall investment in areas like Artificial Intelligence, which could negatively impact Broadcom’s sales and future performance. Separately, see Will Apple Stock Fall To $150 On Tariff Troubles?
Notably, AVGO stock looks attractive, given its solid financial performance lately, but it trades at lofty valuations making it a tricky pick at its current price of around $170. We arrive at our conclusion by comparing the current valuation of AVGO stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Broadcom along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a very strong operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High-Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Broadcom’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, AVGO stock looks very expensive compared to the broader market.
- Broadcom has a price-to-sales (P/S) ratio of 18.1 vs. a figure of 3.2 for the S&P 500
- Additionally, the company’s price-to-operating income (P/EBIT) ratio is 62.2 compared to 24.3 for S&P 500
- And, it has a price-to-earnings (P/E) ratio of 46.8 vs. the benchmark’s 24.3
How Have Broadcom’s Revenues Grown Over Recent Years?
Broadcom’s Revenues have grown considerably over recent years.
- Broadcom has seen its top line grow at an average rate of 24.3% over the last 3 years (vs. increase of 6.3% for S&P 500)
- Its revenues have grown 44.0% from $36 Bil to $52 Bil in the last 12 months (vs. growth of 5.2% for S&P 500)
- Also, its quarterly revenues grew 51.2% to $14 Bil in the most recent quarter from $9.3 Bil a year ago (vs. 5.0% improvement for S&P 500)
How Profitable Is Broadcom?
Broadcom’s profit margins are much higher than most companies in the Trefis coverage universe.
Does Broadcom Look Financially Stable?
Broadcom’s balance sheet looks strong.
- Broadcom’s Debt figure was $68 Bil at the end of the most recent quarter, while its market capitalization is $808 Bil (as of 4/2/2025). This implies a strong Debt-to-Equity Ratio of 7.2% (vs. 19.0% for S&P 500). [Note: A lower Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $9.3 Bil of the $165 Bil in Total Assets for Broadcom. This yields a moderate Cash-to-Assets Ratio of 5.6% (vs. 14.8% for S&P 500)
How Resilient Is AVGO Stock During A Downturn?
AVGO stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- AVGO stock fell 36.3% from a high of $67.09 on 4 January 2022 to $42.71 on 16 October 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-crisis peak by 18 May 2023
- Since then, the stock has increased to a high of $250.00 on 16 December 2024 and currently trades at around $170
Covid Pandemic (2020)
- AVGO stock fell 46.8% from a high of $31.57 on 19 February 2020 to $16.79 on 18 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
- The stock fully recovered to its pre-crisis peak by 5 June 2020
Putting All The Pieces Together: What It Means For AVGO Stock
In summary, Broadcom’s performance across the parameters detailed above are as follows:
- Growth: Extremely Strong
- Profitability: Very Strong
- Financial Stability: Strong
- Downturn Resilience: Strong
- Overall: Very Strong
Broadcom’s strong performance suggests that its stock might be an attractive investment. However, this positive outlook is tempered by the stock’s high valuation. Currently, AVGO is trading at 13 times its trailing revenues and 140 times its trailing earnings. This is notably higher than its average valuation over the past four years, which stood at 14 times sales and 71 times earnings. Consequently, despite its robust performance, the stock appears expensive based on these metrics, leading to the conclusion that AVGO is a potentially tricky stock to buy at its current price.
Not too happy about the volatile nature of AVGO stock? The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Invest with Trefis
Market Beating Portfolios | Rules-Based Wealth