AVGO Gains 3% Overnight: Chipmaker Ups Debt Buyback By $500M After Strong Interest

Broadcom is now buying back $3 billion of its senior notes, after investors tendered $5.5 billion of notes.

• By repurchasing more of its outstanding bonds, Broadcom is reducing its debt load and future interest costs.
• Earlier in the week, JPMorgan said the market is undervaluating the firm’s potential in AI chips and urged buying shares at current levels.
• Stocktwits sentiment for AVGO remained ‘bearish.’

Broadcom, Inc.’s stock rose 3% in overnight trading on Thursday after the chipmaker said it would buy back more of its debt held by investors than previously intended.

To accommodate stronger-than-expected participation, Broadcom said in a filing Wednesday that it increased the maximum amount it will spend on the buyback from $2.5 billion to $3 billion.

This allowed it to accept all validly tendered 4.926% Senior Notes due 2037 and 4.900% Senior Notes due 2038, including those submitted through guaranteed delivery procedures. Broadcom said investors tendered $5.5 billion of notes, far more than the company had initially planned to buy back.

By repurchasing more of its outstanding bonds, Broadcom is effectively reducing its debt burden and potentially lowering future interest expenses. The settlement is scheduled between June 18 and June 23.

JPM Boosts AVGO Stock

The development comes close on the heels of a major vote of confidence from JPMorgan, which urged investors to be “aggressive buyers at current levels.” 

Analysts at the research firm said they believe the market continues to underestimate Broadcom’s “significant dominance” in advanced packaging design, the cadence of new designs, its intellectual property portfolio, and its track record of execution.

Contrary to “recent noise from sell-siders,” the Asia supply chain, and media reports, their research indicates that Broadcom and Alphabet Google have neither delayed nor canceled their next-generation Google Tensor Processing Unit v9 2nm program. 

JPMorgan reiterated its ‘Buy’ rating and a $580 price target, which implies nearly 50% upside from the stock’s closing price on Wednesday.

Retail View On AVGO

Broadcom has perplexed investors. Many see it as one of the key beneficiaries of the AI boom, with the massive Google TPU deal announced in April reinforcing the view. Still, the stock has lagged peers: AVGO is up 14% year to date, while the iShares Semiconductor ETF (SOXX) has nearly doubled over the same period.

On Stocktwits, the retail sentiment for AVGO remained ‘bearish,’ unchanged from the previous day, amid ‘low’ message volume.

“$AVGO grabbed 100 shares in overnight! Let’s see what JP does here; follow them and usually they are on track,” said a trader. Another wrote: “$AVGO this will easily go back  600 levels. Time will come.”

Broadcom’s 12-month forward price-to-earnings ratio is 25x, about half of its peak last December. In comparison, Intel and AMD are trading at 114 times and 59 times forward earnings, respectively.  

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