Avago Shares Initiated Buy, Mizuho Sees 'Strong' 4G

In a report published Friday, Mizuho analysts initiated coverage of Avago Technologies Ltd. AVGO with a Buy rating and price target of $150. The analysts believe that the company holds a leading position in the RF wireless technology industry. The analysts believe that Avago is leading the 4G wave with "FBAR filters on its 9th generation and increasing dollar content in smartphones with its PAD technologies." The 4G ramp in China is expected to be a strong tailwind for the company. According to the Mizuho report, the Enterprise Storage segment is expected to continue its strong performance, given that Cisco Systems, Inc. CSCO reported strong shipments of its ASR 9000 routers, which are mostly supplied by Avago. The company is also well positioned to benefit from a strong ramp in 4G in 2H15, with MediaTek expecting a 100 percent increase in handset shipments in 2H, as compared to 1H and China moving to 5-mode LTE this year. In addition, China Mobile Ltd. CHL reported the highest 3G adds for 1Q15. In fact, all carriers in China have been announcing significant cuts in 4G carrier rates, which is likely to drive 4G subscriber addition in 2H. "AVGO is completely booked on its FBAR filter capacity through 2015 and the ramp of its industry leading 8-inch FBAR wafer capacity will likely lead to significant operational efficiencies versus its peers," the analysts added. The analysts also expect the high margin Emulex division to drive further growth in earnings and gross margin, with CEO Hock Tan focusing on improving efficiencies and execution.