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Broadcom Inc AVGO

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Morningstar’s Analysis

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Broadcom’s Wireless Segment Spearheads Growth in Q1; Shares Remain Overvalued

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Broadcom reported solid first-quarter results with revenue above the midpoint of management’s guidance, thanks to a rebound in wireless revenue stemming from the delayed launch of Apple’s iPhone 12. The firm’s results were also buoyed by healthy networking demand led by cloud data center spending. Broadcom’s product portfolio is well tailored to address the work-from-home environment and we expect continued growth over the course of 2021. We remain positive on Broadcom’s networking, storage, and broadband business units, and we applaud the firm’s integration efforts of its software acquisitions such as Symantec and CA Technologies. Nonetheless, we are maintaining our $350 fair value estimate for narrow-moat Broadcom, and we recommend prospective investors seek a wider margin of safety.

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Company Profile

Business Description

Broadcom--the combined entity of Broadcom and Avago--boasts a highly diverse product portfolio across an array of end markets. Avago focused primarily on radio frequency filters and amplifiers used in high-end smartphones, such as the Apple iPhone and Samsung Galaxy devices, in addition to an assortment of solutions for wired infrastructure, enterprise storage, and industrial end markets. Legacy Broadcom targeted networking semiconductors, such as switch and physical layer chips, broadband products (such as television set-top box processors), and connectivity chips that handle standards such as Wi-Fi and Bluetooth. The company has acquired Brocade, CA Technologies, and Symantec's enterprise security business to bolster its offerings in infrastructure software.

1320 Ridder Park Drive
San Jose, CA, 95131-2313
T +1 408 433-8000
Sector Technology
Industry Semiconductors
Most Recent Earnings Jan 31, 2021
Fiscal Year End Nov 1, 2021
Stock Type Cyclical
Employees 21,000