Analysts Bump Up Broadcom Price Targets Following Q1 Earnings

Broadcom Inc AVGO shares are seeing a nice lift following the release of its fiscal first-quarter results.

The Analysts

• UBS Securities analyst Timothy Arcuri maintained a Buy rating for Broadcom and raised the price target from $275 to $300.
• Raymond James analyst Chris Caso reiterated a Market Perform rating.
• Mizuho Securities analyst Vijay Rakesh reiterated a Buy rating and raised the price target from $295 to $305.
• Wells Fargo Securities analyst Aaron Rakers maintained a Market Perform rating but raised the price target from $265 to $290.
• MKM Partners analyst Ruben Roy maintained a Buy rating and hiked the price target from $280 to $310.

Broadcom shares were rallying 8.3 percent to $290.52 Friday afternoon.

UBS: Broadcom One Of Our Top Ideas

Broadcom delivered strong quarterly results and maintained guidance, belying expectations for a cut to the full-year guidance, Arcuri said in a note.

Notwithstanding the skepticism about a semiconductor ramp into July-October, the analyst sees a company-specific story that cann't be doubted, given key product cycles in networking and big forthcoming content gains for iPhone.

UBS attributed its bullish outlook to Broadcom's slightly higher estimates, due largely to the better trajectory from CA acquisition, and said the stock remained one of the firm's top ideas.

See Also: Broadcom Is Baird's New Top Large-Cap Semi Pick

Raymond James: "We Are Not Comfortable Modelling A Second-Half Rebound"

The mixed first-quarter revenue reflected below-par semiconductor revenues but more-than-expected software revenues, Caso said. The guidance implied a slowdown in software but strong second-half semiconductor revenues.

"Particularly given the company's reduced disclosure, which makes the business tougher to analyze, we're not comfortable in modeling that strong 2H rebound, which correspondingly makes it difficult to recommend the stock," Caso wrote in a note.

Mizuho: CA Acquisition Running Ahead of Expectations

Broadcom suggested the CA integration is on track, with strong renewal rates growing double digits from the 500 core customers, Rakesh said. This was a big contributor to the strong 71 percent gross margins.

"[W]e believe CA could be running ahead of initial ~$3B F19E topline expectations," Rakesh wrote. As such, the firm raised its EPS estimates for the next quarter.

Wells Fargo: We Are Positively Biased Toward Broadcom

Increased confidence in Broadcom's execution on CA integration, along with some meaningful product cycle considerations into second-half of 2019 made Wells Fargo positive toward Broadcom, Rakers said. The analyst essentially left his 2019, 2020, 2021 revenue and EPS estimates unchanged.

MKM Is Positive On Broadcom Shares

Broadcom's results signal a strong start to fiscal-year 2019, Roy said. The semiconductor segment held up relatively well, despite continued headwinds in the wireless segment and some underperformance from the storage segment, the analyst said, citing the company.

Infrastructure software revenue, accounting for 24 percent of the revenues, came in at $1.4 billion, helped by the outperformance of SAN switching, Roy said. The analyst expects revenues at this segment to be sustained through fiscal-year 2019.

"We continue to view AVGO shares as attractively valued with solid growth prospects and continued improvement in margin and cash flow metrics," Roy wrote.

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