Broadcom Ltd (NASDAQ:AVGO) shares are rising nearly 5%, as of this writing, after the chip maker reported strong fiscal fourth-quarter results and issued revenue guidance above Street expectations driven by strong margins and an anticipated 20% sequential sales ramp in its storage business.
In reaction, top analyst Mike Burton of Brean Capital reiterated a Buy rating on shares of Broadcom, while raising the price target to $210 (from $205), which implies an upside of 17% from current levels.
Burton noted, “Consistent with recent quarters, AVGO reported a beat and raise off product cycles in its Wireless and Wired segments and benefited from a resurgence in key end markets like Enterprise Storage. Longer term and more importantly, AVGO demonstrated how its strategy is paying off in leverage in the financial model as the company raised its long-term operating margin forecast to 45% (from 40%) and is targeting to pay out 50% of its free cash flow in dividends going forward as AVGO should be able to realize material cost synergies and general operating leverage based on the company’s expected scale as it further grows rapidly via acquisitions.”
“Netting out the results and guidance, we are raising our CY17 EPS estimates and target price and reiterating our BUY rating. We believe Broadcom is poised for above-average growth with industry leading profitability (not to mention a very reasonable valuation),” the analyst concluded.
As usual, we like to include the analyst’s track record when reporting on new analyst notes. According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Mike Burton has a yearly average return of 12.7% and a 69% success rate. Burton has a 15.4% average return when recommending AVGO, and is ranked #91 out of 4274 analysts.
Out of the 34 analysts polled by TipRanks, 32 rate Broadcom stock a Buy, while 2 rate the stock a Hold. With a return potential of 12%, the stock’s consensus target price stands at $201.68.