Broadcom Blasts Through Expectations

Apr.23.13 | About: Broadcom Limited (AVGO)

Like most large-cap tech stocks, Broadcom (BRCM) has significantly underperformed the market so far in 2013. The stock is slightly down for the year even as the S&P is up approximately ten percent. However, the company just delivered a solid earnings report that beat on the top and the bottom line. It also provided forward guidance that was above consensus. This could be the catalyst that could move this cheap tech stock significantly higher.

Key earnings highlights for BRCM:

  • Revenue for the quarter came in at $2.01B, $100mm above consensus estimates.
  • Earnings per share came in at 65 cents a share, beating estimates by 9 cents a share.
  • The company provided Q2 guidance of $2.1B in sales, $50mm above the current consensus.

Broadcom Corporation provides semiconductor solutions for wired and wireless communications. Its products offer voice, video, data, and multimedia connectivity in the home, office and mobile environments.

Four reasons BRCM can go higher from $33 a share:

  1. Analysts expect the company to grow revenues at around an 8% CAGR over the next two fiscal years. BRCM sports a five-year projected PEG of under 1 (.77).
  2. The 40 analysts that cover the stock have a $40 a share price target on the stock. S&P has its highest rating "Strong Buy" on the shares and a price target of $41 a share.
  3. BRCM sells at less than 10x current operating cash flow and under 11x 2014's projected earnings.
  4. The company has a solid balance sheet with over a $1B of net cash on the books. The shares yields 1.4% and this is the 13th straight quarter BRCM has beat consensus estimates on the bottom line.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BRCM over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.