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Broadcom Inc AVGO

Morningstar Rating
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Stock XNAS Rating as of
$913.12 −10.85 (1.17%)
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As of Delayed Price Pre-Open: $913.87 +0.75
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Company Report

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Broadcom: We Raise Our FVE to $840 and Maintain Wide Moat Rating After VMware Deal Finally Closes

William Kerwin

We raise our fair value estimate for shares of wide-moat Broadcom to $840, from $815, after the firm closed on its acquisition of VMware. We continue to like the deal. In our view, VMware greatly augments Broadcom’s software portfolio, will sustain its wide moat, and enable modestly higher growth into the medium term. Still, we see Broadcom’s valuation as challenging even with a value-accretive deal under its belt.

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Price vs Fair Value

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AVGO is trading at a 9% premium.
Price
$913.08
Fair Value
$357.00
Uncertainty
Medium
1-Star Price
$3,954.00
5-Star Price
$198.00
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Broadcom is a poster child for operating efficiency. It earns excellent operating margins and generates enormous cash flow. It is particularly strong at acquiring companies and trimming excess expenses.

Bears

Broadcom has sizable exposure to nonmoaty businesses, in our view, like its broadband and storage chips.

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News

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Trading Information

Previous Close Price
$923.97
Day Range
$905.85–917.27
52-Week Range
$516.05–999.87
Bid/Ask
$912.00 / $917.37
Market Cap
$476.23 Bil
Volume/Avg
1,046 / 2.4 Mil

Key Statistics

Price/Earnings (Normalized)
21.93
Price/Sales
10.77
Dividend Yield
2.02%
Dividend Yield (Forward)
2.02%
Total Yield
3.54%

Company Profile

Broadcom is the sixth-largest semiconductor company globally and has expanded into various software businesses, with over $30 billion in annual revenue. It sells 17 core semiconductor product lines across wireless, networking, broadband, storage, and industrial markets. It is primarily a fabless designer but holds some manufacturing in-house, like for its best-of-breed FBAR filters that sell into the Apple iPhone. In software, it sells virtualization, infrastructure, and security software to large enterprises, financial institutions, and governments.Broadcom is the product of consolidation. Its businesses are an amalgamation of former companies like legacy Broadcom and Avago Technologies in chips, as well as Brocade, CA Technologies, and Symantec in software.
Sector
Technology
Industry
Semiconductors
Stock Style Box
Large Core
Total Number of Employees
20,000
Website
https://www.broadcom.com

Competitors

Valuation

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Metric
AVGO
QCOM
SWKS
Price/Earnings (Normalized)
 21.9315.3811.60
Price/Book Value
 17.086.752.60
Price/Sales
 10.774.113.33
Price/Cash Flow
 20.2313.959.36
Price/Earnings
AVGO
QCOM
SWKS

Financial Strength

Metric
AVGO
QCOM
SWKS
Quick Ratio
 2.041.511.67
Current Ratio
 2.502.333.33
Interest Coverage
 10.0311.2717.75
Quick Ratio
AVGO
QCOM
SWKS

Profitability

Metric
AVGO
QCOM
SWKS
Return on Assets (Normalized)
 25.10%19.17%15.69%
Return on Equity (Normalized)
 81.60%48.02%23.80%
Return on Invested Capital (Normalized)
 31.74%27.71%18.28%
Return on Assets
AVGO
QCOM
SWKS

Semiconductors Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Economic Moat
Market Cap
NVDA
NVIDIA CorpFbvlq$1.2 Tril
TSM
Taiwan Semiconductor Manufacturing Co Ltd ADRPwp$475.6 Bil
AMD
Advanced Micro Devices IncFbsbz$191.2 Bil
INTC
Intel CorpKjhls$176.7 Bil
QCOM
Qualcomm IncLljbjp$145.5 Bil
TXN
Texas Instruments IncPcdws$142.8 Bil
ADI
Analog Devices IncTbzd$89.6 Bil
MU
Micron Technology IncSjjrj$81.3 Bil
ARM
ARM Holdings PLC ADRRlcvp$65.2 Bil