Broadcom Has Possible 45% Upside, BofA Says
In a report published Wednesday, BofA Merrill Lynch analysts maintained a Buy rating on Broadcom Corporation (NASDAQ: BRCM), with a price objective of $54.
The analysts enumerated the factors supporting a possible 45 percent valuation upside in the company's stock as:
- WiFi competitive risks appear overstated
- The company seems to be poised to lead the new 25Gig Ethernet cycle in data center with its new Tomahawk switch
- The company's competitive position in set top boxes is strengthening versus its main rival STMicroelectronics NV (NYSE: STM)
In the report BofA Merrill Lynch noted the five reasons that the company's connectivity is "stronger than you think:"
- Best-in-class WiFi combos which is very complementary with trend towards use of discrete mobile chips in high-end smartphones being offered by companies like Samsung, Apple Inc (NASDAQ: AAPL), Xiaomi and Huawei
- Broadcom has about 1,000 dedicated engineers and, therefore, has a leading share of about 57 percent in connectivity combos (WiFi / Bluetooth / GPS / FM)
- WiFi combos cost merely $4, constituting only about 2 percent of the high-end smartphone bill of materials. While this is not meaningful enough to insource by customers, for vendor selection it is very critical since WiFi carries most of the data traffic
- By exiting baseband, Broadcom is able to partner better in Wifi with vendors it previously competed against
- "Content expansion with greater 5G WiFi/dual-band penetration, new location hub chip with incremental $2 ASP content adder and TAM expansion in Internet of Things (IoT)"
Latest Ratings for BRCM
|Jan 2016||Bernstein||Downgrades||Outperform||Market Perform|
|Oct 2015||B. Riley||Downgrades||Buy||Neutral|
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