Bravo To Avago: Solid Q4 Results, Game-Changing Merger And Key Insights Into Other Companies


  • With a $35-40B market cap, what's not to love about a company that grew its top and bottom line by 60% and 100% Y/Y, respectively, while returning over 47% YTD.
  • Q4 results reveal significant strength in mobile, on top of enterprise storage, providing incredible 30% Y/Y growth, making their upcoming merger with Broadcom look even more lucrative.
  • With Q1 guidance a bit weaker, but in line with the sector, 2016 is still expected to be a sequentially impressive year for Avago, which is still trading undervalued multiples.
  • Areas of growth in mobile and data reveal potentially useful insight into key OEMs such as Apple and Microsoft, as explosive growth in respective revenue categories reveals strong future demand.
  • Even after a 15% post-earnings run, Avago, as well as the sector in general, is beginning to show signs of serious strength, which in turn support a Buy recommendation for the stock.


Avago Technologies Limited (NASDAQ:AVGO) is a world-class semiconductor company specializing in the design and development of a broad range of mixed-signal, analog, digital, and optoelectronic components and subsystems, offering world class products and services in 4 primary categories of revenue; wireless management, enterprise storage, wired infrastructure, and industrial/other. Together this mix in FY 2015 generated an incredible 95% increase Y/Y in net income, and a 99% increase in EPS, which derived from a 60% increase in revenue Y/Y, bringing the company to 40B in market cap, and a roughly 50% 1-year return, despite the worst secular decline since 2011. In May of 2015, Avago announced a game-changing merger with another semiconductor heavy weight, Broadcom Corporation (BRCM), that will create a powerhouse, and a world leader in both wired and wireless communication semiconductors. Broadcom also provides semiconductor solutions for wired and wireless communication. Their products offer voice, video, multimedia, and data connectivity in the home, office, and mobile markets. The combination will ensure investors a front-row seat for both the IoT ("Internet of things") revolution, as well as the ever-growing need in Data Center infrastructure to support the continued explosion of cloud, Data and enterprise services, as well as the continued transition in wireless infrastructure. The deal stands to close in the first half of next year.

The combination will create a $75B company with over $15B in annual revenues, $6-7B in FCF, and steady growth in the world's key technological areas such as IoT, cloud infrastructure, and mobile, while providing immense pricing, logistical, and technological leverage that will create huge barriers to entry. These barriers will make it even harder for smaller firms to compete in terms of scale and lack of in-house fabrication capabilities. Both companies serve leading OEMs, and together they will ensure continued design wins for key devices such as the iPhone and Galaxy lines, as well as the

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*************Original User account: 17741882***********************General : Aspiring Equity Analyst with 7 years of professional and personal investment experience. Primary focus is Value and Growth both domestic and abroad (Europe and Latin America)Professional Experience: Hedge Fund Assurance and Valuation Services ( AUM 100M - 10B). Exposure to almost every investment strategy and product on the market. Strategies ranged from typical Long/Short Equity & Structured Products such as MBS and CDOs, all the way to reinsurance funds trading catastrophe linked bonds.Licenses: CPA (NJ) Certified Public Accountant CFA Candidate - Level 1 June 2017 Very proud Rutgers Graduate- New Brunswick Campus - GO Scarlet Knights ! - Major: Bachelor's of Accounting SevenSeas Investment Research was created to provide investors with honest, deeply considered, detailed, passionately conducted, straight forward, value focused, fundamental investment research on a variety of asset classes and market topics. I use a combination of traditional value focused fundamental research and a proprietary method of stock selection that can be adjusted to meet a dynamic mixture of different risk tolerances, and various other investor criteria to construct concentrated and unique portfolios to any given individual's investment needs.My deep knowledge of Alternative Investments and Accounting (both GAAP & IFRS), as well as my exposure to dozens of successful hedge fund portfolios and complex investment securities, provided me with a unique perspective few obtain of a side of the market unseen by the retail investor. I wish to share my passion and knowledge for the markets that has grown to an obsession over the last 7 years with the SA community, to bring value to investors ranging from beginners, all the way to seasoned professionals, and network with the thousands of talented individuals from around the world who come to the platform seeking the same objectives. My overall mission is to provide readers with valuable research to assist them in making wise investment decisions. All articles are my own personal views, and do not constitute investment advice. **Please be sure to contact your own investment professional when considering purchasing an investment.SevenSeas will remain dedicated to providing a complete, and consistent level of work and appreciation for the readers. The highest standards of ethics and professionalism will be displayed at all times. I welcome all feedback and can be reached via direct messaging. Best of luck to all, and I hope you enjoy the work.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AVGO, AAPL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We are also Long SWKS and NXPI

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