Chipmaker Broadcom Tops Earnings and Revenue Estimates; Analysts Raise Price Targets

Chipmaker and software infrastructure supplier Broadcom reported better-than-expected earnings and revenue in the fiscal third quarter and forecast revenue above analysts’ expectations for the next quarter, prompting several analysts to raise their one-year price targets.

The semiconductor manufacturer said its revenue climbed 16% to $6.78 billion during the quarter ended August 1, 2021. That was above the Wall Street consensus estimates of $6.76 billion.

On an adjusted basis, the global semiconductor leader earned $6.96 per share, higher than the market expectations of $6.88 per share.

Broadcom fourth-quarter revenue of about $7.35 billion, above expectations of $7.23 billion and adjusted EBITDA guidance of nearly 61% of projected revenue. The company also approved a quarterly cash dividend on its common stock of $3.60 per share.

Broadcom shares closed nearly flat at $491.90 on Thursday. The stock rose over 12% so far this year.

Analyst Comments

“Broadcom (AVGO) posted EPS upside and guided slightly higher, with a notable rebound in smartphone builds, and strength in networking and broadband offset by some weakness in the enterprise. The company seems comfortable that they are shipping to end demand even as customers try to build buffer inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“AVGO is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec. While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

Broadcom Stock Price Forecast

Sixteen analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $550.53 with a high forecast of $580.00 and a low forecast of $475.00.

The average price target represents an 11.92% change from the last price of $491.90. From those 16 analysts, 15 rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $572 with a high of $677 under a bull scenario and $412 under the worst-case scenario. The firm gave an “Overweight” rating to the semiconductor manufacturer’s stock.

Several other analysts have also updated their stock outlook. Piper Sandler raised the stock price forecast to $550 from $525. Evercore ISI lifted the target to $550 from $485. Cowen and company increased the target price to $500 from $478. JPMorgan upped the price target to $600 from $585. Jefferies lifted the price target to $590 from $550.

“Broadcom (AVGO) beat and raised on 19% YY growth in Semis with 17% / 13% QQ in networking and storage. AVGO expects sustained 14% YY growth for Oct Q with strength led by Wireless (next-gen smartphone launch) and Storage (enterprise recovery). We think a capital return commitment with share buybacks could be a catalyst to re-ratings. AVGO’s unique visibility and measured supplying process lowers risk. Raise price target to $590 on 18xCY 2022 EPS, ~7% discount to SOX,” noted Mark Lipacis, equity analyst at Jefferies.

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