Avago Technologies (AVGO) is picking up several positive comments from analysts, as the market starts to recognize that the firm will be a primary beneficiary of the LTE buildout as we move toward a 4G environment, and is currently undervalued. These cheap shares should have further upside as the company reaps the gains from this secular infrastructure trend.
Here are several recent positives for AVGO:
- Citigroup came out yesterday with comments saying that AVGO is a buy on recent weakness.
- Lazard Capital made the same call in mid-December.
- Goldman Sachs also upped its view on Avago's prospects in mid-December.
- Topeka Capital initiated the shares as a "Buy" prior to the market opening today.
Avago Technologies engages in the design, development, and supply of analog semiconductor devices with a focus on III-V-based products. Its product portfolio is comprised of RF amplifiers, RF filters, RF front-end modules, and other communication products.
Here are four reasons why AVGO is a good growth play at $32 a share:
- The company has beat earnings estimates for six straight quarters and is selling at less than 11x forward earnings, a discount to its five-year average (12.9).
- Its balance sheet contains more than $1 billion in net cash (more than 10% of its market capitalization) and it provides a dividend yield of 2.1%.
- The 19 analysts who cover AVGO have a median price target of $41 a share. Credit Suisse has an "outperform" rating on the stock and a $42 price target.
- The stock has good technical support at just under the current price level (see chart).
Click to enlarge image.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in AVGO over the next 72 hours.