Broadcom Inc (NASDAQ: AVGO) reported 13-percent year-over-year third-quarter revenue growth and a 21-percent increase in non-GAAP earnings per share on Thursday. The revenue was roughly in line with estimates, while the bottom line exceeded expectations.
The company issued in-line revenue and gross margin guidance for the fiscal fourth quarter.
Baird analyst Tristan Gerra reiterated an Outperform rating on Broadcom and increased the price target from $290 to $300.
Gera named Broadcom as Baird's top large-cap semiconductor idea.
An attractive valuation; secular growth trends in RF, which is likely to return to double-digit growth in 2020 due to 5G; anticipated share gains; a new Wi-Fi cycle; deep learning ASICs; storage; and other secular growth driver make Broadcom top large-cap semiconductor idea, Gerra said in a Friday note. (See the analyst's track record here.)
Broadcom is a particularly attractive value stock compared to more cyclical semi names, even as the sector adjusts to mid-single digit year-over-year growth into 2019, the analyst said.
Broadcom's acquisition of CA, Inc. (NASDAQ: CA) should add up to 20 percent to EPS, Gerra said — a figure the analyst said is not included in Baird's current estimates. Broadcom sees strong cross-selling synergies with CA's large enterprise customers, he said.
Broadcom expects ongoing expansion in gross margins for existing products, and operating margin growth as the gross margin ramp outruns R&D spending, according to Baird.
The Price Action
Shares of Broadcom have lost about 15 percent year-to-date. The stock was rallying 8.3 percent to $233.90 at the time of publication Friday.
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Latest Ratings for AVGO
|Sep 2018||Bank of America||Upgrades||Neutral||Buy|
|Sep 2018||B. Riley FBR||Maintains||Neutral||Neutral|
View More Analyst Ratings for AVGO
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