UBS Ups Broadcom to Buy on Networking Strength and Uses for Touch Screens

UBS’ Alex Gauna this morning raised his rating on Broadcom (BRCM) to Buy from Neutral, on signs of strong demand from the networking sector. Gauna says solid earnings guidance this week from both NetLogic(NETL) and Integrated Device Technology (IDTI) “alleviates the concern we had regarding BRCM’s networking exposure [32% of sales.]” He reports that IDTI “noted stability in enterprise trends,” while NETL “guided sales up 8%-10%.”

Gauna also says that Broadcom “avoided most of the major Bluetooth pitfalls” in the fourth quarter, and that the company is capturing “meaningful share” with tier-one headset makers. He also says Motorola (MOT) set-top box and cable modem numbers in the fourth quarter were “impressive.”

Meanwhile, Gauna says Broadcom could have a “far larger opportunity” for its touch screen technology” than just the Apple (AAPL) iPhone, for which Broadcom is expected to provide components. “Checks indicate application in larger screen displays, and we believe it makes sense that AAPL will migrate this technology beyond the iPhone and into its broader MP3, Apple TV/iMac and notebook offerings over time."

Gauna also upgraded NetLogic to Buy from Neutral today.

Gauna maintains a $38 target price on Broadcom. This morning, the shares are up $1.15, at $31.84.

BRCM 1-yr chart