Why Investors Just Can't Get Enough Broadcom Stock

Technology

Published: June 5, 2020 11:38 am

Broadcom Inc. (NASDAQ: AVGO) was last seen trading up over 5% and approaching its old highs after the company’s surprise upside expectations. Wall Street analysts were cheering the company’s news and guidance, perhaps with some relief that there was not more bad news coming over the horizon.

Revenue was down 2% to $5.74 billion but beat expectations of $5.69 billion. Broadcom’s Semiconductor Solutions represents about 70% of sales, and this was down 2% to $4.03 billion but still marginally better than expected. The company’s Infrastructure Software segment has the other 30% of revenues, and this rose by 3.5% to $1.7 billion. The relief was in Broadcom’s revenue guidance of $5.75 billion, plus or minus $150 million, and that was more or less in-line with expectations.

With earnings coming in line with expectations at $5.14 per share, the company managed to report free cash flow of $3.07 billion, up from $2.21 billion in the first fiscal quarter.

Broadcom was featured in Friday’s top analyst upgrades and downgrades, but the number of price target hikes that followed included more than a dozen analyst calls.

Broadcom stock was reiterated as Buy and its price target was raised to $360 from $300 at SunTrust Robinson Humphrey. The firm noted that it is still the best dividend yield at 4.2%, and the dividend also is very likely to grow in a more stable environment. William Stein, SunTrust’s analyst behind the call, also noted that that Broadcom is effectively the best growth story in semiconductors at this time.

BofA Securities reiterated its Buy rating and raised its price objective to $360 from $350. Its Vivek Arya sees stronger sales on higher 5G content and pointed to resilient free cash flow returns. The firm’s Buy rating sees multiyear content visibility in 5G with strong and sustainable trends in cloud switching, AI inference and networking. Arya also expects that the July quarter will be the bottom for Semiconductor Solutions.

Here are some of the other calls:

Barclays reiterated its Overweight rating and raised its target to $345 from $320.
BMO Capital Markets reiterated it as Outperform and raised its target to $350 from $330.
Citigroup reiterated its Buy rating and hiked its price target to $360 from $303.
Cowen raised its price objective from $230 to $305.
Deutsche Bank raised its price target to $360 from $300.
Goldman Sachs has a Neutral rating but raised its target to $286 from $231.
JPMorgan reiterated it as Overweight and raised its target to $365 from $340.
KeyBanc Capital Markets raised its price target to $360 from $290.
Mizuho raised its price objective from $315 to $325.
Piper Sandler raised its price target to $360 from $300.
Rosenblatt reiterated its Buy rating and raised its target to $370 from $350.
Susquehanna reiterated its Positive rating and lifted its target to $360 from $340.
UBS reiterated its Buy rating and raised its target price from $275 to $335.
Wells Fargo has an Equal Weight rating but still raised its target to $300 from $220.

Broadcom’s stock price was up over 5% at $324.75 on Friday, against a 52-week range of $155.67 to $331.58. Its market cap is now $130 billion and its prior consensus analyst target price from Refinitiv was $301.44.