Why Analysts Are Chasing Broadcom So Much Higher

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Broadcom Ltd. (NASDAQ: AVGO) reported its most recent quarterly results after the markets closed on Thursday. Overall, revenues and earnings beat expectations, but this was not enough for investors. As a result analysts poured into the stock.

24/7 Wall St. has included some highlights from the earnings report, as well as how analysts view the stock after the report.

Broadcom delivered 7% sequential growth in revenues and 14% sequential growth in its earnings per share. The company’s growth forecast was tied to strong trends in the wireless business segment.

EPS for the quarter totaled $2.89 and revenue was $3.79 billion, versus the consensus estimates of $2.77 in EPS on $3.76 billion in revenue.

The company did not give much detail on its earnings and guidance in the formal press release. That left its conference call being more important. Hock Tan, Broadcom’s president and CEO, said:

We delivered strong third quarter financial results with 7 percent sequential growth in revenue and 14 percent sequential growth in EPS, a clear demonstration of the leverage inherent in our operating model. We are expecting an even stronger performance in the fourth quarter, driven by robust growth in our wireless segment.

Credit Suisse reiterated an Outperform rating and raised its price target to $200 from $180. The firm further detailed in its report:

We continue to argue AVGO is one of the most compelling stocks in our coverage universe – we see multiple drivers of upside, including Apple/Samsung content gains of >20% per year, Tomahawk switching and Jericho routing ramp, share/profit gains in STB as STM exits, M&A synergies in excess of $750 million already promised, debt paydowns, and other potential M&A transactions. Furthermore, post the acquisition of core Broadcom, the Company has 19 sustainable franchises with an aggregate LT Rev CAGR of >5%, OpM >40%, and cost synergies of >$750 million, implying LT EPS potential of $14-16. The strength of AVGO’s portfolio of businesses is significantly dampening the impact of any single headwind, allowing AVGO to weather “isolated storms” while maintaining the integrity of EPS upside.

A few other analysts issued calls on the stock as well:

  • Barclays has an Overweight rating and raised its price target to $205 from $185.
  • B. Riley has a Buy rating and raised the price target to $215 from $200.
  • Brean Capital has a Buy rating and raised its price target from $200 to $205.
  • Canaccord Genuity has a Buy rating and raised its price target to $215 from $200.
  • Cowen has an Outperform rating and raised the price target to $205 from $200.
  • D.A. Davidson has a Buy rating and raised the price target to $205 from $190.
  • Deutsche Bank has a Buy rating and raised its price target from $200 to $205.
  • Drexel Hamilton has a Buy rating and raised its price target to $201 from $192.
  • Goldman Sachs raised its price target to $205 from $190.
  • Jefferies has a Buy rating and raised its price target to $209 from $190.
  • JPMorgan raised its price target to $220 from $195.
  • Mizuho has a Buy rating and raised its price target to $200.
  • Morgan Stanley has an Overweight rating and raised its price target by $9 to $200.
  • Oppenheimer has an Outperform rating and raised its price target to $200 from $190.
  • Pacific Crest has an Overweight rating and raised its price target to $200 from $180.

Shares of Broadcom closed trading last week at $173.11, with a consensus analyst price target of $195.22 and a 52-week trading range of $111.63 to $179.42.