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In an earlier article here, I argued that the recent sell-off in shares of Broadcom (NASDAQ:BRCM) have made the company an attractive value play. Since then, the stock has risen 7.8%, beating the Dow Jones by nearly 550 bps. I find that the company still has some upward potential, but am more reserved than the sentiment on the Street with the near "strong buy" rating. Analog Devices (NASDAQ:ADI) has demonstrated more industry-wide the company-specific challenges in poor performance. Based on my multiples analysis and a DCF model, I am also reserved more on this company than other analysts are.

From a multiples perspective, Analog Devices is the cheaper of the two. It trades at 13.4x past earnings versus 19.7x past earnings for Broadcom. With Texas Instruments (NASDAQ:TXN) and Intel (NASDAQ:INTC) trading at 13.1x and a 11.2x past earnings respectively, the two smaller companies could have a hard time justifying the premium. In addition, Texas Instrument and Intel are also safer with their brand names and higher respective dividend yields of 2.2% and 3.3%.

At the fourth-quarter earnings call, Analog Devices' CEO, Jerald Fishman, noted disappointing results and macro headwinds:

ADI's revenues for Q2 were about $716 million, which was down 6% sequentially, and 7% year-over-year, and at the low end of the guidance that we've provided to you last quarter. Our sequential revenue decrease was primarily the result of declines in industrial and communications sector revenues.

Our Q4 revenues in automotive increased sequentially, and consumer revenues were seasonally stronger than in Q3. For the year, our total revenues increased 8.4% to just about $3 billion. Although our full year revenue was right on our plan for our fiscal 2011, the quarter-to-quarter volatility was very pronounced, mostly as a result of industry supply imbalances that dominated the landscape through much of the year, along with European sovereign debt and U.S. deficit concerns that have been more recently concerns in the market, and have created industry-wide uncertainty in virtually every geography.

Auto may be improving, but the softening end-market demand in communications will keep many investors on the sidelines until a recovery. Lower utilization rates are also likely to drive down gross margins by 130 bps sequentially. It is also concerning that more than one-fifth of the business comes from amplifiers, which has been experiencing stagnant growth. With that said, I am optimistic about the correction to inventories and management's operational control / handle on costs.

Consensus estimates for Analog Devices' EPS forecast that it will decline by 16.2% to $2.28 in 2012, grow by 20.2% in 2013, and then decline by 1.1% in 2014. Assuming a multiple of 15.5x and a conservative 2013 EPS of $2.39, the company is roughly at fair value.

Broadcom, in my view, has meaningfully higher upside. I am in agreement with one analyst that the market reaction to share loss in connectivity has been overblown. The fact that the company had a design win in WP7 indicates that Broadcom can navigate a challenging environment. Furthermore, Broadcom is well positioned in WiFi and has an impressive track record of growth. The company trades below its historical average and management tends to be conservative with guidance.

Consensus estimates for Broadcom's EPS forecast that it will grow by 4% to $2.83 in 2011, decline by 2.8% in 2012, and then grow by 11.6% in 2013. Of the last 25 revisions to estimates, all have gone up for a net change of 1.1%. Assuming a multiple of 14x and a conservative 2012 EPS of $2.65, the rough intrinsic value of the stock is $37.10, implying 13.6% upside. A CAGR of 4.12% over the next three years discounted back at a WACC of 9% yields an even higher figure of $39.54.

Source: Broadcom May Break $40, Analog Devices Riskier