Broadcom (BRCM) will host its analyst day with the Street on Thursday, and that means it was time today for the sell side to offer some observations in advance of the event.
BMO Capital‘s Ambrish Srivastava reiterated an Outperform rating on the shares and a $40 price target, writing that while he is looking for revenue of $2.03 billion and EPS of 68 cents for the current quarter, versus the company’s outlook, offered in October, of $1.95 billion to $2.1 billion. But he notes that last year, the company raised its outlook at its investor meeting.
Srivastava thinks Broadcom needs to talk about operating expense “trajectory” and how it can produce “operating leverage.” It also needs to talk about what’s going to produce growth for its “connectivity” business that includes chips for WiFi, and perhaps talk about the short-range broadband standard “802.11ac” within that market. Also, he wants to know what the chip industry’s move to smaller transistor geometries means for Broadcom and “how is the company addressing these challenges.”
Pacific Crest‘s Michael McConnell reiterates an Outperform rating and a $41 price target, writing that he, too, thinks there could be a hike in the forecast. He’s modeling $2.02 billion and 70 cents.
While the company will talk about growth in each business, he thinks the focus should be squarely on 802.11ac and Broadcom’s efforts to make inroads in the handset “baseband” chip market against Qualcomm (QCOM):
802.11ac [...] is important to Broadcom because it: (1) is another barrier to competitive integration risk and (2) drives a 25% to 40% ASP increase over the legacy 802.11N standard. We believe Broadcom has a six-month time frame to market advantage on 802.11AC shipments versus the competition; we expect 802.11AC will likely be designed into new mobile devices from Apple (AAPL) and possibly Samsung [Electronics (005930KS)] in 1H13. We also expect a focus on Broadcom�s 4G baseband product roadmap and anticipate that the company will launch its new 4G baseband at the CES Trade Show (Jan. 8-11), with customer design win announcements.
Lazard Capital Markets‘s Daniel Amir likewise reiterates a Buy rating on the shares, and a $45 price target, writing that in addition to talking about recent strength in the smartphone market, thanks to deals with Apple and Samsung, he thinks Broadcom will spend some time talking about what it can accomplish in the networking business:
BRCM is likely to dedicate time to discussing the networking segment with specific concentration around Multi-core processing, 10G Ethernet and wireless base stations. We expect management to provide color on how it plans to continue to grow the company’s share in networking and the potential positive GM impact for this segment.
Amir’s estimate for the current quarter is $2.05 billion. He thinks in addition to updated forecast, the company may talk about a 22% operating margin target for next year.
Similarly, Mizuho Securities USA‘s Ruben Roy, who has a Buy rating on the shares, wrote that the acquisition of networking semiconductor designer NetLogic this year puts networking front and center:
With BRCM’s acquisition of NetLogic now well underway in terms of
integration into the company’s technology road-map, coupled with the
integration of various, smaller recent acquisitions, BRCM is now addressing a much larger TAM (~$9B) with its Infrastructure & Networking segment than the company had been only a few years ago.
You can catch a Webcast of Broadcom’s event here.
Broadcom shares today closed down 21 cents, or 0.7%, at $32.17.
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