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Broadcom Inc AVGO

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Broadcom’s Broad-Based Momentum Continuing Into Early 2022; Raising FVE to $500

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

Broadcom reported strong fourth-quarter results ahead of our expectations. The firm’s results were buoyed by healthy networking demand led by cloud data center spending and sharp wireless growth. Broadcom’s product portfolio is well tailored to address the work-from-home environment and we expect continued double-digit top-line growth next quarter, especially as enterprises resume infrastructure technology spending consistent with the COVID-19 recovery. 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. Management is optimistic that recent tailwinds will continue into 2022, with robust bookings and lean inventories. Consequently, we are raising our fair value estimate to $500 per share from $400 as we roll our model forward and incorporate stronger top-line growth as well as operating leverage. Shares rose 6% during after-hours trading and are trading close to our bull case valuation. We recommend prospective investors wait for a wider margin of safety before investing in narrow-moat Broadcom.

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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 software.

1320 Ridder Park Drive
San Jose, CA, 95131-2313
T +1 408 433-8000
Sector Technology
Industry Semiconductors
Most Recent Earnings Oct 31, 2021
Fiscal Year End Oct 31, 2022
Stock Type Cyclical
Employees 20,000