Trading Strategies: AVGO& AAOI
Hello everyone! Today i want to share some trading ideas with you!
1
Seeing very few bullish takes on $Applied Optoelectronics(AAOI)$ at the moment.
Pretty standard when the stock price goes down...people flee.
Here's my base case estimates:
2027 revenue: $2.5B
2028 revenue: $5B (if they reach the target ~2 quarters later than current forecasts)
2028 Margin: 17% margin
2028 Net income: $850M
110M Share count -> $7.72 in EPS
15x multiple -> $115 share price
That's my CONSERVATIVE 2028 share price.
2
$Broadcom(AVGO)$ is probably one of the safest bets in big tech right now as long as you're not too concentrated in names like $NVIDIA(NVDA)$ $Advanced Micro Devices(AMD)$ $ASML Holding NV(ASML)$ where there's a lot of overlapping risks.
If you're not...then there's a lot to like about $Broadcom(AVGO)$.
-> Controls ~75% of AI ASIC market.
-> 6 custom chip customers
-> $179B of contracted backlog already on the books
-> ASP (average selling price) of chips heading towards ~$18k range
If $30 EPS in FY28 is feasible then this is a $450 stock at minimum in my opinion.
That would be only a 15x multiple on 61% CAGR so we'd be looking at ~0.25x PEG if a 15x multiple were used.
Probably a very good base case to work from.
$331 -> $450 = 36% in ~18 months. Nothing incredible but probably something very safe if that's what you're looking for right now.
Also think if they do $40 EPS in FY29 / FY30 on that same 15x multiple. We're now working towards a +$600 stock.
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