Analysts, Options Traders Blast AVGO After Earnings

Today's options pits are trading at four times the intraday average

Assistant Editor
Jun 4, 2021 at 10:48 AM
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Broadcom Inc (NASDAQ:AVGO) secured no less than 10 bull notes this morning, following the company's upbeat fiscal second-quarter earnings report. Broadcom reported quarterly profits and revenue that both finished slightly above Wall Street's forecasts. Going forward, the chip maker gave a better-than-expected outlook, as the adoption of 5G technology continues to ramp up. 

Circling back to the flurry of bull notes, these came in the form of price-target hikes, including a huge bump to $585 from $570 at J.P. Morgan Securities. In addition, UBS, Rosenblatt Securities, and Jefferies all upped their price targets to $550. Coming into today, the majority of analysts were extremely optimistic towards AVGO. In fact, 18 of the 21 in coverage called the security a "buy" or better, with three rating it a "hold," and not a "sell" in sight. Plus, the stock's consensus 12-month price target of $525.22 is a 13% premium to last night's close.

Broadcom stock is relatively muted in response, last seen 0.2% higher at $465.68. On the charts, AVGO recently bounced off the $420 mark, the third time the shares have done so this year, as the level has solidified itself as a floor for the stock's biggest pullbacks. Yesterday's smaller pullback was saved by the 100-day moving average, which put pressure on the shares for the better part of a month. Year-to-date, AVGO is up 6.2%.

Today's option pits show calls and puts trading at a similar pace. So far, 2,683 calls and 2,098 puts have exchanged hands, which is four times what's typically seen at this point. Most popular is the weekly 6/4 477.50-strike call, followed by the 475-strike call from the same series. This means options traders are speculating on more upside for AVGO by the time the market closes today.

Now seems like a good opportunity to weigh in on Broadcom stock's next move with options. The equity's Schaeffer's Volatility Index (SVI) of 34% sits higher than just 28% of all other readings in its annual range, suggesting options players are pricing in relatively low volatility expectations at the moment.

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