Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
At Last, Broadcom Looks Ready to Rally by Tiernan Ray
Summary: Systems-on-a-chip manufacturer Broadcom saw its stock fall 30% in the past year as it became 'a poster child for stock-options excess' and some of its customers, like Motorola, ran into hard times. But the bad news may finally be behind Broadcom, which welcomes in a new CFO with a 'stunning' balance sheet of over $2.8 billion in cash and marketable equities and zero debt. The stock trades at just 21x 2008 earnings, while the company enters more aggressively to the cellphone chip market, the fastest growing semiconductor field. Though Broadcom faces stiff competition in that market from Qualcomm and Texas Instruments, Broadcom may well profit from Qualcomm's legal troubles and some expect a lucrative contract with Nokia. Given historical multiples, author Tiernan Ray believes 'the stock could have upside to $48 over the next 12 months, some 50% above the current price.'
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BRCM 1-yr chart: