UPDATE: Nomura Reiterates on Broadcom Corporation Following Strong Q3 Results

In a report published Wednesday, Nomura analyst Romit Shah reiterated a Buy rating on Broadcom Corporation BRCM, but lowered the price target from $36.00 to $33.00. In the report, Nomura noted, “Broadcom reported Q3 results that were better than expectations. Q3 revenue of $2.15bn was higher than our estimate of $2.13bn. Gross margin of 51.4% was 90bps higher than our estimate of 50.5%, driven by favorable mix and sale of obsolete inventory, and operating expenses of up $8mn was better than guidance of up $20mn. As such, EPS of $0.76 was $0.07 higher than our estimate. However, Broadcom missed Q4 expectations due to ongoing weakness in wireless and softness in Broadband. Q4 revenue guidance of $1.98bn (down 8% qoq) was lower than our estimate of $2.08bn and consensus of $2.13bn. While numbers are lower, we believe Broadcom is an attractive deep value idea. The stock trades at 1.8x EV/sales, versus a 5-year low of 1.2x and average of 3.7x. EV/FCF of 9.2x compares to a five-year average of 12.3x. Our price target of $33 (from $36) is based on a multiple of 17x CY14E EPS (including stock comp), cash adjusted.” Broadcom Corporation closed on Tuesday at $27.14.