Broadcom Analyst Roundup

Broadcom Corporation BRCM announced a range of shareholder-focused initiatives at its annual Analyst Day on Tuesday.

The stock responded by trading higher Wednesday morning with shares surging over 2 percent to $43.64.

Below are highlights from analyst comments following the meeting along with current ratings and price targets.

Deutsche Bank - Buy, $50 price target

“As expected, BRCM's analyst day focused on how a maturing semi sector is requiring a more mature strategy from BRCM as well. Specifically, the company highlighted that slower, but more sustainable and profitable growth can improve cash generation that can (and will) be increasingly returned to shareholders. As BRCM delivers these changes, we continue to see upside to consensus EPS estimates and valuation.”

Topeka - Buy, $48 price target

“We...were encouraged by the Company’s comprehensive presentation of a focus shift to profitable growth and greater emphasis on shareholder value creation. In support of this shift, management presented updated metrics and compensation plans, along with an enhanced target operating model. Reflecting its focus on core business segments and stabilizing connectivity contribution, management tightened its 4Q14 revenue guidance to the high-end of prior guidance. We expect BRCM shares to benefit from these presented strategic shifts. We maintain our Buy rating and are raising our price target from $45 to $48.”

Brean - Buy, $53 price target

“The main takeaway was the new focus on returning capital via share buybacks and dividends. We continue to like BRCM considering: 1) it will continue to benefit from cost reductions from the wind-down of the baseband business, 2) its remaining businesses are #1 or #2 in their respective segments, and 3) we anticipate an increasing amount of ‘shareholder friendliness’ in the way of lower stock-based comp., greater share repurchases, and dividend increases. We are adjusting our estimates to account for the updated guidance, and changing our price target from $46 to $53, which is more reflective of current market multiples.”

Jefferies - Buy, $52 price target

“BRCM announced it would target GM (ex-SBC) of 54-57 percent (2014E: 54.2 percent), bracketing our expectation of 56-57 percent, and OM (ex-SBC) of 23-28 percent (2014E: 22.4 percent), compared to our 26-27 percent. BRCM expects to lower stock-based comp (SBC) to below <4 percent sales by 2016. Including SBC, the OM target is 19-24 percent (2014E: 17.5 percent). We view management targets as conservative. BRCM plans to generate more cash domestically, and return it to shareholders. The company intends to repurchase 3x as much stock as it issues in 2015 and 2x in 2016. It also increased the annual dividend by 17 percent (1.3 percent div yield). It does expect its tax rate to increase to 5 percent from 1 percent over the next four years.”

Credit Suisse - Neutral, $40 price target

“While Analyst Day might have been missing the shock and awe (no ASR, no change to CY15 EPS of $2.75) some had hoped, we believe announced changes should be applauded and will be well received by investors. BRCM's position in ING and Broadband is unassailable and while Connectivity continues to be a potential headwind - to-date the company has seen little / no impact post the baseband divestiture. We view BRCMs strong IP position as emblematic of our broader more positive view on Semis - increasing barriers to entry driving scarcity value and sustainable growth.”