Can Broadcom Live Up to Expectations?

Broadcom Inc. (NASDAQ: AVGO) is scheduled to release its fiscal second-quarter financial results after the markets close on Thursday. The consensus forecast calls 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.

The company’s previously issued guidance for the quarter called for revenue of $5.7 billion, plus or minus $150 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was expected to come in at $3.135 billion, plus or minus $75 million.

During the first fiscal quarter, the company generated $2,322 million in cash from operations and spent $108 million on capital expenditures. At the end of the quarter, cash and cash equivalents totaled $6.44 billion.

At that time, management noted that the fundamental semiconductor backdrop has been improving. Broadcom also said that it had not seen any material impact on its businesses due to COVID-19 in the first quarter.

While Broadcom fell short of consensus earnings estimates in the first quarter, it had offered upside surprises of up to a nickel per share in the three periods before that. The question is whether it has recovered enough to return to that pattern.

Investors still seem to be on board. Excluding Thursday’s move, Broadcom stock had outperformed the S&P 500 and Dow Jones industrial average with a retreat of only 2% year to date. In the past 52 weeks, the share price was up closer to 16.5%.

Analysts who weighed in on Broadcom ahead of the report also seemed bullish:

  • BofA Securities has a Buy rating and a $350 price target.
  • Rosenblatt Securities has a Buy rating with a $350 target.
  • Susquehanna has a Buy rating with a $340 target price.
  • Morgan Stanley has a Buy rating with a $333 price target.

Broadcom stock 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.