Analysts Are Pumped About Broadcom's Double Beat

After an impressive first-quarter earnings beat, Loop Capital Markets analyst Betsy Van Hees reiterated her Buy rating and raised her price target to $285 on Broadcom Ltd (NASDAQ: AVGO).

Van Hees noted three reasons why Broadcom remains one of Loop's large-cap picks for 2017 as:

1. Broadcom should capitalize on current demand trends.
2. Broadcom recently defied seasonal expectations.
3. Recent acquisition of Brocade should be accretive.

Strongly Positioned To Benefit From Current Demand Trends

Van Hees highlighted that Broadcom expects to benefit from an increase in its content in the iPhone 8 compared to the iPhone 7. Credit Suisse research analyst John Pitzer noted “AVGO expects iPhone 8 content up ~40 percent y/y, better than the ~20 percent y/y gains for the iPhone 7, importantly mgmt. noted that the Apple Inc (NASDAQ: AAPL) ramp this year is a bit slower than normal.”

Defying Seasonal Industry Expectations

Broadcom beat on both EPS and revenue as it “benefited from the ramp of the Galaxy S8 and increased content in the S8 with all other end-markets and products tracking largely in-line with expectations,” said Van Hees. This occurred while its Wireless Communications and Wireless Infrastructure segments were both down quarter over quarter.

Brocade Communication Systems Acquisition Should Be Accretive

Additionally, Van Hees expects the pending acquisition of Brocade Communication Systems, Inc (NASDAQ: BRCD) to be about $0.04 accretive to both her Q4 estimate as well as for the 2018 fiscal year.

Broadcom was trading up over 8 percent at $253.54 during Friday’s trading session.

Related Links

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Image Credit: By Cmglee - Own work, CC BY-SA 3.0, via Wikimedia Commons

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