Credit Suisse On Broadcom: More Confident On Earnings Than Revenues, But Both Should Beat Estimates

Broadcom Ltd AVGO is scheduled to report its FQ3 results on Thursday, after market close. Credit Suisse’s John W. Pitzer reiterated an Outperform rating on the company, while raising the price target from $180 to $200.

“We expect both JulQ Rev/EPS results and OctQ Rev/EPS guidance ABOVE CS/Street estimates – our confidence is higher on EPS than Rev, albeit both should beat,” Pitzer mentioned.

July Quarter

For the July quarter, the analyst expects revenue and EPS upside driven by robust content gains and initial builds for the Apple Inc. AAPL iPhone 7, along with a recovery in Enterprise Storage, better than anticipated growth in the Wired business, and potentially continued improvements in OpEx.

October Quarter

For the October quarter, Pitzer expects revenue and EPS upside to be driven by a full quarter’s benefit from the iPhone 7 builds, sustained Wired momentum, persisting recovery in Enterprise Storage and lower Interest Expense.

Investor Expectations

“Investor expectations appear high into the quarter but the stock is up only in line with SOX since reporting AprQ, is trading at a discount to peers, has NT momentum from strong iPhone7 content gains, has new product cycles in Wired, and has continued M&A synergies, driving EPS upside (versus the estimates and the consensus),” the analyst stated.

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