China has finally approved Broadcom's (NASDAQ: AVGO) acquisition of VMware (NYSE: VMW), enabling the $61 billion acquisition to close.
The stock has been surging for the past year, up about 85%. Over the past month alone, the stock is up 17% and has created a new 52-week high of ~$1000 as it touched $999.87 on Nov. 20.
Broadcom is due to report its fourth-quarter (Q4) earnings on Dec. 7 after market close. Investors and analysts would be keenly looking forward to CEO Hock Tan and CFO Kirsten Spears' commentary on the VMware acquisition. The company's outlook, growth estimates, and future plans would be in focus.
Broadcom is a promising tech investment due to its robust semiconductor product portfolio and solid technical foundation. With consistent earnings beats, stringent expense control, and profitability, Broadcom is a compelling choice for investors.
Strategic investments in high-end processing and networking capabilities are paying off, especially as AI spending accelerates. Broadcom has navigated the worst in its smartphone business and sustained demand in high-end networking, making it a resilient choice for long-term investors.
VMware is 'highly complementary' to Broadcom
According to KeyBanc Capital Markets' analyst John Vinh, the benefits of the acquisition should begin to materialize "immediately."
KeyBanc believes VMware (VMW) is "highly complementary" to Broadcom's (AVGO) infrastructure software and semiconductor franchises and offers "sizable" synergy potentials. So, the acquisition should be accretive towards the company's EPS and gross margins.
It is also likely to contribute towards Broadcom's cash flow generation and diversification and its ability to operate across public, private, and hybrid clouds.
Vinh increased his price target to $1,200 from $1,000 following the transaction and kept his overweight rating on AVGO stock.