Broadcom Changing Tune Into Earnings? (BRCM)

Broadcom Corp. (NASDAQ: BRCM) is set to report earnings after the close today.  First Call has consensus estimates at $0.32 non-GAAP EPS on $1.02 Billion in revenues.  Next quarter estimates are $0.29 EPS on $998.16 million revenues.

Shares are up some 6% ahead of today’s results and it is hard to know if much of that is short covering off of recent lows or if it is raw buyers out hoping the company will have a better bottom line number.  Options are difficult to use currently because of the high VIX and the large price change today, but it appears that options traders are braced for a move of close to $1.90.  Analysts are still fairly high as far as price targets as the average price target still looks to be $38.00 even after the huge sell-off this last quarter.  The chart on Broadcom isn’t worth discussing other than that so far after this two-day bounce this $20.50 to $21.00 range has acted as support.  The 52-week high is $43.07 and that is nearly 100% from today’s share price.

Last quarter the company did say it was investing heavily in this last quarter into R&D of products for the very large handset markets and for new product offerings.  This was a large part of the drag last quarter when shares sold off roughly 20% after earnings on word that R&D would be at the expense of earnings. 

The company currently has a one-up on Qualcomm in this patent fight, although this group of patent cases is as hard to call as a war between two neighboring banana republics.

Last quarter was a total fake out as many had been expecting a strong quarter after the stock was looking like it was going to challenge multi-year highs.  That didn’t happen and it has been an ugly hold since the last earnings date.  Shares were just yesterday at the inverse of last quarter’s pre-earnings trading by challenging two-year lows. 

This had over 14.5 million shares listed in the short interest as of the end of December.  Because of the large price drop last quarter and because of the continued share plummet today, traders will be watching this one closely.

Jon C. Ogg
January 24, 2008