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Broadcom Mum On Qualcomm, But Expected To Raise Price?

2:37 pm ET, 08 Dec 2017

Broadcom AVGO

Broadcom (NASDAQ: AVGO) reported solid fiscal fourth-quarter earnings and provided investors with a forecast for the January quarter that was relatively in line with analysts' expectations after factoring in the firm's recent acquisition of Brocade. 

Business conditions still appear quite healthy across most end markets, as the Company will continue to reap the benefits of content gains within Apple's latest iPhone series. Longer term, with Brocade in the fold, the Company also raised a couple of its long-term profitability targets. 

Broadcom management said little on the call about Qualcomm, but we continue to believe that such a deal would be materially accretive to Broadcom. Broadcom may be able to raise its bid price as high as $80 per share and still find the acquisition to be quite accretive. 

Broadcom's revenue in the October quarter was $4.84 billion, up 9% sequentially and 17% year over year and ahead of the midpoint of the firm's previous guidance of $4.80 billion as discussed in early September. 

Wireless revenue was the bright spot, up 33% year over year and up 40% sequentially, again thanks to Broadcom's content gains within Apple's latest iPhones. 

Enterprise storage revenue appears to be cooling off, particularly for chips used in storage hard-disk drives, with sales down 12% sequentially but still up 15% year over year. 

The Firm's largest segment, Wired Infrastructure, saw sales rise 3% year over year but were down 3% sequentially.

Over the last year, AVGO has returned +56.40%. This return is higher than Technology Sector (25.12%), Semiconductor - Broad Line Industry (25.97%), and S&P 500 (17.65%) returns.

Based on Finstead research, AVGO average analyst price target is $295.04 (visit Finbot and type "AVGO price target").

Broadcom Limited (AVGO) Stock Guide

Updated at: 9:33 am ET, 13 Nov 2020

Before we start: if you're looking for AVGO stock price, you can quickly find it out by visiting Finny and typing "AVGO quote". If you're looking for a quick scoop on AVGO stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "AVGO". You'll get all this info in one place. Or you can just type "AVGO news" to get the latest stock news.

Looking to buy or sell Broadcom Limited (AVGO)? Interested in getting the full scoop on AVGO, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this AVGO stock guide, we'll address key questions about AVGO, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are AVGO earnings?
2. When is AVGO earnings date?
3. What is AVGO dividend?
4. What is AVGO dividend yield?
5. What is AVGO stock forecast (i.e., prediction)?
6. AVGO buy or sell? What is AVGO Finny Score?
7. What are the reasons to buy AVGO? Why should I buy AVGO stock?
8. What are the reasons to sell AVGO? Why should I sell AVGO stock?
9. What are AVGO key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are AVGO earnings?

AVGO trailing 12-month earnings per share (EPS) is $5.33.

2. When is AVGO earnings date?

AVGO earnings date is December 10, 2020.

3. What is AVGO dividend?

AVGO forward dividend is $13.00.

4. What is AVGO dividend yield?

AVGO forward dividend yield is 3.72%.

Analyst Predictions

5. What is AVGO stock forecast (i.e., prediction)?

Based on AVGO analyst price targets, AVGO stock forecast is $402.00 (for a year from now). That means the average analyst price target for AVGO stock is $402.00. The prediction is based on 29 analyst estimates.

The low price target for AVGO is $350.00, while the high price target is $450.00.

AVGO analyst rating is Buy.

Analysis

6. AVGO buy or sell? What is AVGO Finny Score?

#{finnyScore:83}Our quantitative analysis shows 5 reasons to buy and 1 reason to sell AVGO, resulting in Finny Score of 83.

7. What are the reasons to buy AVGO? Why should I buy AVGO stock?

Here are the reasons to buy AVGO stock:

  • Broadcom Limited's proprietary FBAR filters are well suited to handling a variety of 4G LTE radio frequency signals, and LTE complexity is only expected to rise in the years ahead.
  • Although Broadcom Limited's wireless revenue growth and earnings have been stellar in recent years, global LTE adoption is still in its infancy, giving the firm a nice runway for further growth.
  • Broadcom Limited continues to make reasonable acquisitions in order to expand and diversify, and we anticipate further measured deals in the years ahead.
  • The Semiconductor Industry serves as a driver, enabler and indicator of technological progress. The Internet of Things (IoT) is creating newer avenues and is largely believed to be the next semiconductor growth opportunity with the potential for billions of connected devices. Broadcom’s strong relationships with leading OEMs across multiple target markets have helped it to gain key insights into the requirements of customers.
  • Moreover, Broadcom’s focus on multiple target markets mitigates operating risks and lessens the exposure to volatility in any single market. Based on its expanding product portfolio, the company is well-positioned to address the needs of rapidly growing technologies like IoT and 5G. We believe that Broadcom’s extensive product portfolio, which serves multiple applications within four primary end markets, will help it to gain significant market share going ahead.
  • Avago's merger with Broadcom for a total consideration of $37 billion is arguably the largest of its kind in the semiconductor chip industry and created a behemoth with one of the most diversified communications platforms at combined annual revenues of approximately $15 billion. Synergistic benefits from the merger is likely to increase profitability through economies of scale and mutual sharing of manufacturing expertise, research and development costs and adjustment of staffing expenses.
  • Acquisitions, over time, have been Broadcom’s most favored mode for penetrating unexplored markets. The acquisition of LSI Corporation helped the company to diversify its existing business line from wired infrastructure, wireless and industrial businesses into the storage chip market. The strategic move was aimed at augmenting its revenues, as the industry braces for more consolidation amid a challenging macroeconomic environment.
  • Broadcom generates significant cash flow that enables it to pay consistent dividend. The company paid aggregate cash dividends of $717 million, $716 million and $408 million, during fiscal years 2017, 2016 and 2015, respectively. Due to strong and relatively stable cash flow, we believe that the dividend payout appears sustainable and makes the stock quite attractive.
  • AVGO quarterly revenue growth was 5.50%, higher than the industry and sector average revenue growth (-0.83% and 0.53%, respectively). See AVGO revenue growth chart.
  • AVGO profitability is improving. The YoY profit margin change was 49.21 percentage points. See AVGO profitability chart.
  • AVGO forward dividend yield is 3.72%, higher than the industry (0.56%) and sector (0.23%) forward dividend yields. See AVGO forward dividend chart.
  • AVGO forward P/E ratio is 13.74, which is low compared to its industry peers’ P/E ratios. See AVGO forward P/E ratio chart.
  • AVGO average analyst rating is Buy. See AVGO analyst rating chart.

8. What are the reasons to sell AVGO? Why should I sell AVGO stock?

Let's look at the reasons to sell AVGO stock (i.e., the bear case):

  • Even with the formation of Broadcom Limited, the combined firm still has significant customer concentration with Apple, and it would be a damaging blow if Apple were to ever switch to another vendor.
  • Pricing on 4G RF components has been robust in recent years, but large customers like Apple and Samsung wield significant pricing power and could exert pricing pressure on vendors like Broadcom over time.
  • Demand within some of Broadcom’s key end markets, like optical networking and enterprise storage, is inherently lumpy, and the firm’s results may face volatility from time to time.
  • A significant portion of Broadcom’s revenue comes from a handful of customers including Foxconn, which accounted for 14% of net revenues in fiscal 2017. Top five direct customers accounted for 40% of the company’s top-line in fiscal 2017 as compared with 30% reported in fiscal 2017. Loss of any of these top five customers can significantly hurt top-line growth.
  • Broadcom operates in a highly competitive market. The company faces significant competition in most of its operating markets that negatively impacts top-line growth. Pricing pressure also keeps margin under pressure.
  • Broadcom’s frequent acquisitions have escalated integration risks. Moreover, we note that the large acquisitions negatively impacted the company’s balance sheet in the form of high level of goodwill and intangible assets, which totaled $40.07 billion or almost 73.5% of total assets as of February 4, 2018.
  • Acquisitions have also negatively impacted Broadcom’s balance sheet, as high indebtedness adds to the risk of investing in the company. As of February 4, 2018, the company had total debt of $17.59 billion.
  • AVGO stock price ($370.20) is close to the 52-week high ($384.25). Perhaps now is a good time to sell? See AVGO price chart.

Key Stats

9. What are AVGO key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for AVGO:

Metrics AVGO
Price $402.17
Average Price Target / Upside $402.00 / -0.04%
Average Analyst Rating Buy
Forward Dividend Yield 3.48%
Industry Semiconductors
Sector Technology
Number of Employees 15,000
Market Cap $151.08B
Forward P/E Ratio 14.68
Price/Book Ratio 6.51
Revenue (TTM) $23.2B
YoY Quarterly Revenue Growth 5.50%
Profit Margin 10.70%

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