Wedbush: Broadcom Can Squeeze $1.3-$1.5B In Synergies From 'Bloated' Symantec

Broadcom Inc AVGO is reportedly close to buying Symantec Corporation SYMC and the semiconductor company is likely to emerge as the sole bidder, according to Wedbush.

The Analyst

Daniel Ives maintained a Neutral rating on Symantec with an unchanged $19 price target.

The Thesis

Broadcom reportedly has sufficient financing available to acquire Symantec for around $20 billion or $26 to $28 per share, Ives said in a Wednesday note. (See his track record here.)

The price tag implies a multiple of 4x EV/revenue, which is a "sweet spot" that investors will likely approve given the following recent events at Symantec, the analyst said:

• The sudden departure of CEO Greg Clark in early May.
• Recent "soft" earnings and guidance.
• Company and industrywide headwinds.

The multiple headwinds Symantec faces imply that "now is the right time" to sell itself after a 14-year history of "one step forward, two steps back," Ives said.

The need to find a buyer has likely intensified since late 2018 amid Symantec-Thoma Bravo buyout reports, he said. At that time Symantec felt its outlook was "bright," but this may no longer be the case, the analyst said. 

From Broadcom's point of view, the company should be able to squeeze $1.3 billion to $1.5 billion of annual cost synergies from "the bloated Symantec structure," Ives said.

The acquisition would come at a time when Broadcom CEO Hock Tan is placing more emphasis on growing its software vision and follows the 2018 acquisition of CA Technologies, according to Wedbush. 

Price Action

Broadcom shares were trading down slightly at $275.47 at the time of publication Wednesday, while Symantec shares were up 0.18% at $25.60. 

Related Links:

Report: Broadcom Secures Financing For Symantec Acquisition

Symantec Analyst Says Cybersecurity Company's Investors Would Benefit From Broadcom Buyout