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Unlike any other stock on the market today, I have recently become captivated by chip maker Broadcom (NASDAQ:BRCM). I will concede that if it were not for the success of Apple's (NASDAQ:AAPL) recent quarter, I likely would have never given the company any thought - much less develop a sudden love affair with it. To that extent, I think it is fair to say that I have developed a sudden appetite for chips. But whether it was by accident or by proxy, finding value in the market today is not something that should be taken for granted, considering how expensive everything has gotten. One of the very few with room yet to grow is Broadcom, and I have reason to believe that a $50 share price is very well attainable.

The quarter and year that was

Recently, the company reported Q4 and 2011 earnings that topped Wall Street estimates. It earned an adjusted profit of 68 cents a share, on revenue of $1.82 billion. Analysts had expected 64 cents per share, on revenue of $1.81 billion, according to a consensus survey by FactSet Research. To add more excitement to the call, the company issued sales outlook for the current quarter that also topped what analysts had projected.

JPMorgan analyst Harlan Sur said in a note:

Although management was reluctant to call a bottom in the first quarter, we believe there are enough areas of strength in the form of new product and program ramps that should enable Broadcom to drive growth in the second quarter and into the second half of the year.

The company's earnings as well as optimistic outlook is an impressive sign that the semiconductors are indeed on a rebound considering how weak margins have been within the entire sector, which includes names such as Qualcomm (NASDAQ:QCOM) as well as Texas Instruments (NASDAQ:TXN). But as with all three companies, their link to Apple may serve as enough of a growth driver for the next several quarters and likely the rest of the year. In particular, of the revenue that Broadcom generates Apple accounts for over 10 percent of that figure by the fact that it uses the company's chips in all of its products on the market.

For Broadcom, as great as the outlook appears for the coming year when discussing its growth potential in smartphones and devices, there is another area in which it competes that is also due for a rebound. In following Cisco (NASDAQ:CSCO) as much as I have, it should be noted that Broadcom is a formidable rival in the routing and switching space as well. An area that has been down of late due to weak technology spending, but once it fully rebounds, the company's ability to steal market share should not be underestimated.

But you don't have to take my word for it - it seems several Wall Street analysts already agree, with its highest target being $55. The question is, with so much coverage on the stock and with positive expectations, how much more good news can there be? In other words, with the stock up already 27 percent on the year, has all the good news been priced in? I am not ready to declare that to be the case at all. As Apple's sales continue to grow, as well as the sales from other names, such as Google (NASDAQ:GOOG), it stands to reason that Broadcom's revenue should rise to commensurate the sales figures of the devices.

Summary

With a forward P/E of 11, the stock to me remains highly undervalued with yet has room to grow when compared with Texas Instruments as well as Nvidia (NASDAQ:NVDA). The level of stiff competition will be perceived as a risk for those considering Broadcom. But this is nothing new and a concern the company can easily navigate as evident by its recent earnings and stellar outlook. Value investors who are willing to be patient should give this company a long look and expect shares to approach $50 by year's end.

Source: Broadcom Is On Its Way To $50