Chipmaker Broadcom Tops Q1 Earnings Estimates; Target Price $525

Chipmaker and software infrastructure supplier Broadcom reported better-than-expected earnings and revenue in the fiscal second quarter and expects revenue above analysts’ expectations for the current quarter.

The semiconductor manufacturer said its revenue climbed to $6.61 billion during the quarter ended May 2, 2021, up from $5.74 billion seen in the same period a year ago. That was above the Wall Street consensus estimates of $6.51 billion.

On an adjusted basis, the global semiconductor leader earned $6.62 per share, higher than the market expectations of $6.43 per share.

Broadcom forecasts its third quarter of the fiscal year 2021, ending August 1, 2021, revenue at nearly $6.75 billion and adjusted EBITDA at about 60%. That was higher than the Wall Street consensus estimates of $6.6 billion.

But the upbeat results did not help stocks, which fell about 2% to $464.8 on Thursday. The stock rose over 6% so far this year.

Analyst Comments

“Upside on broadband and wireless drove a beat in the quarter. Broadcom expects strength in semiconductors to continue into the July quarter, led by strength in broadband, hyperscale and an improvement in enterprise. Remain Overweight and increase price target to $555,” noted Craig Hettenbach, equity analyst at Morgan Stanley.

“Broadcom (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 7X turns 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 heading into 2021. And with the company’s net leverage reduced meaningfully it should be in the position to execute on tuck-in deals in software.”

Broadcom Stock Price Forecast

Seventeen analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $525.75 with a high forecast of $575.00 and a low forecast of $440.00.

The average price target represents a 13.11% increase from the last price of $464.80. Of those 17 analysts, 15 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $555 from $538 with a high of $657 under a bull scenario and $404 under the worst-case scenario. The firm gave an “Overweight” rating on the semiconductor manufacturer’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $585 from $570. Cowen lifted the target price to $478 from $470. Piper Sandler increased the target price to $525 from $500. UBS upped the target price to $530 from $510. Citigroup raised the price target to $500 from $470.

“A very clean F2Q beat on broad-based robust demand with an above consensus F3Q outlook on continuation of existing trends. Cloud/networking spending remains resilient with surprisingly resurgent Broadband trends offsetting continued soft but set to improve Enterprise spending,” noted Matthew D. Ramsay, equity analyst at Cowen.

“As expected, Wireless was down on seasonally with consistent contributions via Software. PT to $478, reit Market Perform,”

Check out FX Empire’s earnings calendar