UPDATE: Goldman Sachs Upgrades Avago Technologies to Buy on Cyclical Recovery

Goldman Sachs raised its rating on Avago Technologies AVGO from Neutral to Buy and increased its price target from $40 to $44. Goldman Sachs noted, "We upgrade Avago to Buy from Neutral as we believe both fundamentals and the stock can outperform again in 2013 due to cyclical and secular factors: (1) We expect cyclical recovery in networking and industrial after a 15%-20% inventory correction in 2H12. Organic margin improvement in networking plus rich overall mix shift in 2013 vs. 2012 should drive gross margin expansion. (2) We model continued secular growth in wireless with most (about 85%) new smartphone sales at VZ and T poised to convert to LTE in 2013. (3) Valuation is reasonable with AVGO trading at 19% discount to top-tier analog on NTM Street EPS despite higher structural growth." Avago Technologies closed at $34.57 on Wednesday.