Broadcom Limited: Mega Merger Is The Beginning Of A New Era In The Semiconductor Space
SevenSeas Investment Research • 85 Comments
SevenSeas Investment Research • 85 Comments
Will Avago Be A Rock In A Turbulent Semiconductor Sea?
Stephen Simpson, CFA • 10 Comments
Stephen Simpson, CFA • 10 Comments
Today, 3:46 PM
- Broadcom (NASDAQ:AVGO) -- up 4.4% after its continuing operations marked a solid beat in yesterday's earnings report -- is seeing price target hikes as analysts weigh the impact on the company and on peer wireless players.
- B. Riley's Craig Ellis has boosted his price target generously to $235 from $215, implying near-32% upside from today's higher price. Strength should continue in optical and data center, and wireless should see a seasonal drop, falling in the mid-teens ("about 50% greater than our projection after seasonal tailwinds go from positive to negative").
- Canaccord Genuity analyst Mike Walkley has reiterated a price target of $250, 40% upside. "Consistent with our iPhone estimates, we believe the strong Broadcom wireless sales that increased 32% sequentially are consistent with our modeling of strong content share gains driving more of the year-over-year sales growth versus iPhone units."
- Meanwhile, Instinet's Romit Shah boosted his price target to $190 from $180, and Morgan Stanley's Craig Hettenbach reiterated a $210 price target on the stock he calls a "core holding."
- Previously: Northland Securities suggests Broadcom's Q4 indicates positively for Qualcomm, Marvell Technology, Silicon Motion Technology (Dec. 09 2016)
Today, 9:19 AM
Today, 7:48 AM
- With Broadcom (NASDAQ:AVGO) revealing plans to acquire Brocade (NASDAQ:BRCD) and then divest its networking business, which includes Ruckus Wireless, analysts are closely examining who the potential buyer could be.
- "Frankly, I think people would be surprised at how many interested buyers there are," one source told CRN. "Those buyers are a mix of financial sponsors, so private equity companies and also strategic buyers."
- In a research note, RBC Capital Markets analyst Mitch Steves said the sale of Brocade's networking business could come at a price tag of around $2.2B.
Yesterday, 5:38 PM
Yesterday, 5:35 PM
Yesterday, 4:26 PM
- Broadcom (AVGO +1.3%) is up 2.6% after hours following a firm beat on profits from continuing operations, and solid guidance in fiscal Q4 results where it also doubled its dividend.
- The interim dividend was raised to $1.02/share. Net loss (including discontinued operations) was $668M, about $1.59/share. EPS from continuing operations was $3.47.
- Net revenue by segment: Wired infrastructure, $2.07B (up 449% Y/Y; up 1% Q/Q); Wireless communications, $1.35B (up 98%; up 34% Q/Q); Enterprise storage, $561M (down 12%; up 6% Q/Q); Industrial and other, $155M (up 8%; down 21% Q/Q).
- Cash from operations was $1.352B, and it got $200M in net cash from completing divestitures.
- For the coming first quarter of fiscal 2017, Broadcom sees net revenue (on a non-GAAP basis) of $4B-$4.15B, above consensus for $3.96B, and gross margin of 60.5%-62.5%. It's forecasting operating expenses of $785M, interest and other expenses of $101M and has a $73M provision for income taxes.
- Conference call to come at 5 p.m. ET.
- Press Release
Yesterday, 4:11 PM
Wed, Dec. 7, 5:35 PM
Fri, Dec. 2, 12:13 PM
- Analyst Vijay Rakesh notes fundamentals across the subset remain in place and despite coming up on a seasonally weaker March quarter, sees recent downturn resulting in an acquiring opportunity.
- Highlights a semiconductor group trading at 2013 levels and sees forthcoming catalysts stemming from robust earnings growth, cost synergies, positive industrial, automotive, defense and aerospace, and further M&A consequent expected regulatory climate improvements.
- Recommends Intel (INTC +1%), Qualcomm (QCOM +2.4%), Micron Technology (MU +3.1%), Broadcom (AVGO +0.7%), ON Semiconductor (ON +0.7%), Cypress Semiconductor (CY +0.6%) and Microsemi (MSCC +0.6%).
Thu, Dec. 1, 12:05 PM
- November monthly performance was: -2.53%
- 52-week performance vs. the S&P 500 is: -8%
- No dividends were paid in November
- Top 10 Holdings as of 9/30/2016: WPP PLC (OTCPK:WPPGF): 4.6543%, Suncor Energy Inc (SU): 3.3398%, RELX PLC (OTC:RLXXF): 2.90681%, Sky PLC (OTCQX:BSYBF): 2.85131%, Taiwan Semiconductor Manufacturing Co Ltd (2330): 2.58654%, SAP SE (OTCPK:SAPGF): 2.47674%, CGI Group Inc A (GIB): 2.4507%, Publicis Groupe SA (OTCQX:PGPEF): 2.38795%, CK Hutchison Holdings Ltd (OTCPK:CKHUF): 2.38697%, Broadcom Ltd (AVGO): 2.36644%
Tue, Nov. 8, 1:42 PM
- Broadcom (AVGO +0.4%) has a $6.5B bridge loan lined up from six banks for its acquisition of Brocade (BRCD -0.1%), Reuters reports.
- The companies came to agreement on an all-cash $5.9B buyout of Brocade (including debt) last Wednesday.
- Signing on to the unsecured loan, according to Reuters: BofA Merrill Lynch, Deutsche Bank, Barclays, Bank of Montreal, Citigroup and Credit Suisse. They'll hold the loan until permanent financing is in place by next April, when closing is expected.
Mon, Nov. 7, 11:08 AM
- Voyager, considered by Facebook to be the industry's inaugural "white box" transponder and routing offering, utilizes components supplied by Acacia Communications (ACIA +6.1%), Lumentum Holdings (LITE +5.4%) and Broadcom (AVGO +2.7%) [William Blair notes development favorable for all]. Collaborations with Celestica (CLS +1.8%) and SnapRoute have additionally been arranged.
- Analyst Dmitry Netis suggests Voyager is poised to "become a disruptive force in the optical networking market," and further restates Outperform coverage he initiated on Acacia Communications last Monday. The company's AC400 DSP ASIC and optics module will be contained in the newly-designed transponder.
- Acacia Communications share price summary – 1-month; -33%, 3-month, +3.5%; since IPO, +115%
Thu, Nov. 3, 10:44 AM
- October monthly performance was: -3.29%
- 52-week performance vs. the S&P 500 is: +9%
- No dividends were paid in October
- Top 10 Holdings as of 6/30/2016: RELX PLC (OTC:RLXXF): 2.98184%, Sky PLC (OTCQX:BSYBF): 2.94851%, British American Tobacco PLC (OTCPK:BTAFF): 2.66638%, Teva Pharmaceutical Industries Ltd ADR (TEVA): 2.50786%, WPP PLC (OTCPK:WPPGF): 2.36147%, Taiwan Semiconductor Manufacturing Co Ltd (2330): 2.35528%, CGI Group Inc A (GIB): 2.31975%, Roche Holding AG Dividend Right Cert. (OTCPK:RHHVF): 2.27147%, Broadcom Ltd (AVGO): 2.25054%, Deutsche Boerse AG (OTCPK:DBOEF): 2.18513%
Wed, Nov. 2, 7:16 AM
- As has been floated for the past few days, Broadcom (NASDAQ:AVGO) is buying Brocade (NASDAQ:BRCD), with the all-cash price working out to $12.75 per share.
- Broadcom expects to fund the deal with new debt and cash already on the balance sheet. The purchase is expected to be immediately accretive to non-GAAP free cash flow and EPS. The company sees Brocade's FC SAN business as contributing about $900M of pro forma non-GAAP EBITDA is FY18.
- A conference call is set for 8 ET.
- BRCD +8.1% to $12.15 premarket.
Tue, Nov. 1, 3:25 PM
- If Broadcom (AVGO -1.4%) goes through with an acquisition of Brocade Communications (BRCD +7.3%), it would combine its $67B business with one now worth $5.6B after two days of sharp gains.
- In a deal (which is not final and could fall apart), Broadcom would keep Brocade's Fibre Channel and storage business (about $1.5B in annual revenues) but look to divest the networking business -- much of which was acquired in Brocade's own acquisition of Ruckus Wireless.
- Broadcom would bulk up its offering tied to data center backbones with the addition of a high-margin fiber business like Brocade's.
- Brocade is now up 31% over the past two days, moving it into positive ground for 2016 (up 23.9%).
Tue, Nov. 1, 3:15 PM
- Brocade Communications (NASDAQ:BRCD) has made another sharp move up, now +7.1%, on a report that it's near a deal to be acquired by Broadcom (AVGO -1.5%).
- The news comes a day after its deal-chatter-fueled 22% rise.
- The deal could be announced later this week, Reuters reports.
- RBC Capital has upgraded shares to Outperform and raised its price target to $14, making room for 29% more upside from the new level set. As with others, RBC is pointing to Broadcom (NASDAQ:AVGO) chief Hock Tan as a very interested party.
- “We think that Brocade makes sense as a strategic asset to the right operator or CEO (Hock Tan as a solid operator), which would lead to mid-single-digit accretion for the acquirer (35%+ operating margin potential),” writes Mitch Steves.
- If Broadcom can achieve $200M in opex synergies in a deal, it's $0.65 accretive to the acquirer, Steves says. And he also points to other potential buyers, including IBM, Oracle and Hitachi (OTCPK:HTHIY).