We’ve had some major stock splits so far in 2024. Chipotle Mexican Grill performed a 50-for-1 split. Nvidia had a 10-for-1 stock split. Walmart split its shares 3-for-1. And there are more with others on the way.
Some investors may be wary of buying stocks now, whether or not there has been a split. Major indexes have fallen sharply on concerns about a potential recession and the Bank of Japan’s rate hike.
However, I think the pullback presents a great opportunity for forward-thinking investors. This is the best stock split stock to buy in August despite the market sell-off.
Two-factor authentication
I won’t keep you in suspense. My pick for the best stock split stock to buy this month is… Broadcom (NASDAQ: AVGO). Why Broadcom? I think two factors stand out. But they have nothing to do with the semiconductor maker’s 10-for-1 stock split in July.
The first factor behind my choice of Broadcom is its growth outlook. Broadcom’s revenue grew 43% year-over-year in the second quarter of 2024, fueled by demand for its artificial intelligence (AI) solutions and the company’s acquisition of VMware. I expect AI and VMware to remain important growth drivers going forward.
No one does networked AI accelerators better than Broadcom. It’s no surprise that seven of the eight largest AI superclusters in the world rely on the company’s network technology. Broadcom predicts that its AI network revenue growth will accelerate.
Since acquiring VMware, Broadcom has signed about 3,000 of its top 10,000 customers to build an on-premises self-service virtual private cloud. Most of these are multi-year contracts, so the revenue will continue to flow for a long time. Broadcom will undoubtedly focus on signing more of these large customers to VMware.
The second factor that matters to my case for Broadcom is its valuation. Broadcom shares trade at 23.9 times forward earnings. That multiple is relatively low for a top-tier AI stock. The stock’s valuation looks even more attractive when growth projections are factored in. Its price-to-earnings-to-growth (PEG) ratio with five-year growth projections is just 1.06, according to LSEG.
Wall Street is also optimistic about Broadcom’s prospects
I am not the only one who is bullish on Broadcom. Wall Street is also bullish on the stock.
Of the 29 analysts surveyed by LSEG in August who cover Broadcom, 10 rate the stock a “strong buy.” Another 17 recommend it as a “buy.” The remaining two analysts rate Broadcom a “hold.”
The average 12-month price target for Broadcom is more than 36% above the current share price. The most pessimistic analyst surveyed by LSEG thinks the stock can rise 9%.
Sure, plenty of Wall Street analysts are also bullish on Nvidia, Chipotle, and Walmart. However, analyst price targets for these other stock split stocks don’t reflect as much upside potential as the average price target for Broadcom.
Short term versus long term
Broadcom’s stock price has fallen more than 20% from its June high. It’s possible that macroeconomic concerns weighing on the broader stock market could also hold back Broadcom in the near term.
However, I think the long-term outlook for Broadcom is bright. The current sell-off is an opportunity to buy a great stock that is on sale.
Should You Invest $1,000 in Broadcom Now?
Before buying Broadcom stock, here are some things to consider:
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Nvidia, and Walmart. The Motley Fool recommends Broadcom and recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
These are the best stocks with stock splits to buy in August, despite the market sell-off. Originally published by The Motley Fool
