Morgan Stanley Believes LSI Deal will Turn Out Well for Avago Technologies Ltd.

In a report published Monday, Morgan Stanley analyst Craig Hettenbach reiterated an Overweight rating and $78.00 price target on Avago Technologies Ltd. AVGO. In the report, Morgan Stanley noted, “We remain Overweight AVGO as the company's above-average growth, strong FCF, diversified revenue stream (after LSI), and consistently high profitability is not reflected in the current multiple (P/E of 13x pro-forma 2015e EPS for the combined company). We have high conviction in management's ability to execute on driving LSI's OMs from 17% to 30% over the next few years. Notably, Avago doubled its OMs from 15% to 30% post the company's LBO and is very effective at maximizing pricing for its IP, which we think will benefit the LSI business.” Avago Technologies Ltd. closed on Friday at $71.57.