Analysts and options traders blow up AVGO after earnings

Chipmaker Posted Profits and Revenue Above Analyst Estimates

Broadcom Inc (NASDAQ: AVGO) got no less than 10 bullish notes this morning, following the company’s upbeat financial report on second quarter results. Broadcom reported quarterly earnings and earnings which both finished slightly above Wall Street expectations. Going forward, the chipmaker has given a better-than-expected outlook as the adoption of 5G technology continues to accelerate.

Returning to the bullish bill wave, these manifested in the form of target price hikes, including a huge increase to $ 585 from $ 570 at JP Morgan Securities. In addition, UBS, Rosenblatt Securities and Jefferies have all raised their price targets to $ 550. As of today, the majority of analysts were extremely optimistic about AVGO. In fact, 18 of the 21 covered rated the title as “buy” or better, with three calling it “hold” and not “sell” in sight. Additionally, the 12-month consensus stock price target of $ 525.22 is a 13% premium from last night’s close.

Broadcom stock is relatively quiet in response, the last time it rose 0.2% to $ 465.68. On the charts, AVGO recently rebounded off the $ 420 mark, the third time stocks have done so this year as the level solidified as a bottom for the stock’s biggest pullbacks. Yesterday’s weaker pullback was spared by the 100-day moving average, which put pressure on stocks for most of the month. Since the start of the year, AVGO is up 6.2%.

Today’s option booths display both call and put options at a similar rate. So far 2,683 calls and 2,098 puts have been traded, which is four times what you typically see at this point. The most popular is the weekly 6/4 477.50 keystroke call, followed by the 475 keystroke call of the same series. This means that options traders are speculating on more upside for AVGO by the time the market closes today.

Now looks like a good opportunity to weigh in on the next move in Broadcom stock with options. The Schaeffer Stock Volatility Index (SVI) of 34% sits above just 28% of all other readings in its annual range, suggesting that options players are currently pricing volatility expectations relatively low.

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Eric Harris

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