Broadcom (AVGO) loses more than 3% ahead of FQ3 earnings

• Broadcom will report fiscal Q3 earnings after the close on September 1.
• Wall Street consensus calls for adjusted EPS of $9.55 on revenue of $8.41 billion.
• AVGO stock is down more than 3% with the general market trend.

Broadcom (AVGO) stock is off 3.2% in the first hour of trading on Thursday as the market eagerly awaits results for the fiscal third quarter expected after the close. Wall Street is expecting adjusted earnings per share (EPS) of $9.55 on revenue of $8.41 billion. The GAAP EPS is forecast much lower at $6.62.

AVGO stock is trading at $483, down 3.2%, in the first hour of Thursday's session. The Nasdaq has shed 1.7%.

Broadcom earnings preview

In the same quarter one year ago, Broadcom earned $6.96 a share in adjusted EPS on revenue of $6.78 billion. This means the current fiscal Q3 is forecast to come in 37% ahead on adjusted EPS and 24% ahead on sales YoY.

A major theme pushing AVGO shares lower is that fellow semiconductor competitors Nvidia (NVDA) and Marvell (MRVL) have recently reduced their guidance for the coming quarters.

Nvidia guided the current quarter from an expectation of $6.9 billion to $5.9 billion. Then Wednesday, in a filing with the SEC, the company said the US government would be limiting its exports of premium integrated circuits to China and Russia, which could have a $400 million effect on the third quarter's sales figure.

Announced back in May, Broadcom is still intending to acquire VMware (VMW) for $61 billion. VMware reported a set of positive earnings beats on August 25 where it posted adjusted EPS of $1.64 on revenue of $3.34 billion. Analysts will likely have more questions concerning how the takeover is progressing. 

Lastly, during the previous earnings call management said they expect adjusted EBITDA of 63.5% in fiscal Q3. How margins shape up will also persuade the market's thinking about the share price. Is Broadcom still the same robust king of growth or is inventory clearing also digging into its guidance and pricing?

Still, AVGO is trading at just 13 times forward adjusted EPS, so the stock is fairly cheap as is. On a GAAP basis, the forward P/E is just under 20. This compares to its industry average of 19 and 22, respectively.

Broadcom stock forecast

Broadcom stock chart is fairly simple. A descending top trendline has been in place since last November as it has for most tech stocks. To break above, AVGO stock would need to close above $540 to $550. 

For now, the trend is down though, and the early July low of $464 is the next support level. This price level also acted as support back in August 2021. Below there is support at the memeable $420. Don't get any ideas, Elon! This one worked during steep sell-offs in January, March and May of 2021, so we think it unlikely to crash below here anytime soon.

AVGO weekly chart