Can Broadcom stock keep up its growth momentum in 2021?

Broadcom Inc. (AVGO) is best known as a top supplier of connectivity chips to smartphone makers. The demand for its connectivity chips remained high over the last year as leading smartphone makers, including Apple and Samsung, rolled out their 5G-enabled devices.

The elevated demand helped Broadcom stock gain a value of more than 55 percent during the past 12 months. Broadcom shares are currently trading around $485, while its market value is approaching $200 billion.

Financial Performance

The California-based chipmaker is also doing well in terms of financial performance.  Broadcom last month reported an adjusted profit of $6.62 per share on revenue of $6.61 billion for the second quarter ended May 2. The results exceeded analysts’ average estimate of $6.43 for earnings and $6.51 billion for revenue.

The strong quarterly results were mainly driven by solid demand for its semiconductor products. The company’s chip sales in the quarter jumped 20 percent on a year-over-year basis to $4.82 billion, beating the consensus forecast of $4.71 billion.

Broadcom is Diversifying

Despite its strength in the semiconductor market, Broadcom is trying to strengthen its position in the software space. The company is reportedly in discussions to buy SAS Institute Inc, a software firm engaged in selling business analytics and management applications.

Broadcom is expected to acquire SAS in a transaction that could value the North Carolina-based software firm between $15 billion and $20 billion. If the talks are successful, the acquisition will help Broadcom in expanding its foothold in the software market.

Bottomline

Broadcom is capitalizing on the growing demand for its chips and trying to boost revenue from its software business. In short, the growth prospects of Broadcom stock look bright, at least in the near term.