What to Watch When Broadcom Reports

Chris Lange

Broadcom Inc. (NASDAQ: AVGO) is scheduled to release its fiscal first-quarter financial results after the markets close on Thursday. The consensus estimates are calling for $5.35 in earnings per share (EPS) and $5.73 billion in revenue. The same period of last year reportedly had $5.85 in EPS and $5.45 billion in revenue.

During the latest quarter, Broadcom completed its acquisition of the Enterprise Security business of Symantec. This new business will now operate as the Symantec Enterprise division of Broadcom. This division expands Broadcom’s footprint of mission critical infrastructure software for the Global 2000.

Recently, Morgan Stanley named Broadcom as a top pick and said that it had increased confidence in the company’s strategy. The brokerage house upgraded the shares to Overweight from Equal Weight. In the report, Morgan Stanley detailed:

We upgrade AVGO to Overweight on increased confidence in the company’s software strategy against low expectations. We estimate that AVGO’s current P/E multiple of 13.5X implies risk that Symantec’s revenue will decline from a reset level of $2bn and targeted cost cuts prove aggressive. In contrast, we model revenue stable at $2bn annually and have the company reaching its target of $1bn in synergies on a run-rate basis by Q4′20.

Excluding Thursday’s move, Broadcom had performed more or less in line with the broad markets, with its stock up about 26% year to date. In the past 52 weeks, the stock was up closer to 30%.

A few analysts weighed in on Broadcom ahead of the report:

  • Susquehanna has a Buy rating with a $345 price target.
  • Oppenheimer rates it as Outperform with a $350 price target.
  • Piper Jaffray has a Buy rating with a $345 price target.
  • Merrill Lynch has a Buy rating.
  • Morgan Stanley has an Overweight rating.
  • Cascend Securities has a Buy rating and a $350 target.

Shares of Broadcom traded about 3% to $329.52 on Thursday, in a 52-week range of $230.33 to $330.16. The consensus price target is $325.89.