Two of Wall Street’s top analysts at Canaccord are making bullish to more neutral cases for three large-cap semi-conductors: Broadcom Ltd (NASDAQ:AVGO), NVIDIA Corporation (NASDAQ:NVDA), and Intel Corporation (NASDAQ:INTC). While Canaccord joins a bullish tide of confidence for Broadcom fresh on the heels of yesterday evening’s fiscal third quarter earnings beat, the firm sees an exciting evolution at play for NVIDIA after its Computex collaboration announcements. Moreover, the firm is hedging its bets on Intel, even if intrigued by its Core X-series processor family unveiled in Taipei. Let’s take a closer look:
Broadcom Is a Leading Global Diversified Chip Maker
Broadcom shares are rising 4% in pre-market trading today after the wireless chip giant impressed with robust second fiscal quarter results across the board, with fiscal third quarter outlook meaningfully soaring over expectations. Top analyst Michael Walkley at Canaccord praises Broadcom’s long-term sales and earnings prospects, and on back of hiked estimates coupled with expectations for the Brocade deal to wrap up by the end of next month, the analyst reiterates a Buy rating on shares of AVGO while boosting the price target from $250 to $272, which represents an 11% increase from where the stock is currently trading.
For the second fiscal quarter of 2017, AVGO posted pro forma EPS of $3.69, outperforming the analyst’s forecast calling for $3.47. The company brought in a gross margin of 63.1%, beating the analysts’ and consensus projections of 62%. Walkley attributes strong sales to a solid one-two hook of good “execution and mix.” Revenue guidance for next quarter also hit with another beat, riding stellar trends and a window into wired division ASIC sales for deep learning.
Walkley surmises with great conviction for AVGO’s long-term picture, asserting, “With a Q2/F’17 FCF margin of 32% approaching management’s long-term target of 35%, we expect Broadcom to meaningfully increase its dividend during its annual evaluation at then end of the October fiscal year consistent with a 50% payout ration of FCF. Following the completion of the Brocade acquisition likely to close by July 31, we anticipate a continued focus on improving margins and cash flows and less of a focus on new M&A. We believe Broadcom is a leading global diversified semiconductor company with a broad portfolio of category-leading products and a leading customer base addressing the wireless and wired infrastructure, enterprise & data center networking and storage, IP traffic routing, and Industrial verticals. Strong Q3/F17 guidance was well above our expectations and supports our thesis the company is positioned for solid long-term sales and earnings growth with industry-leading margins.”
Michael Walkley has a very good TipRanks score with a 66% success rate and a high ranking of #26 out of 4,567 analysts. Walkley yields 21.8% in his annual returns. When recommending AVGO, Walkley garners 50.8% in average profits on the stock.
TipRanks analytics exhibit AVGO as a Strong Buy. Out of 14 analysts polled by TipRanks in the last 3 months, all 14 are bullish on Broadcom stock. With a return potential of nearly 12%, the stock’s consensus target price stands at $262.25.
NVIDIA’s Platform Computing Ecosystem Looks Better than Ever
NVIDIA announced a new Max-Q gaming laptop design inspired by Pascal architecture at the Computex conference in Taipei along with a new HGX Reference Architecture partnership, two exciting strides forward for the chip giant in both gaming and datacenter segments. Top analyst Matt Ramsay at Canaccord weighs in with enthusiasm, believing the giant continues to solidify its strong standing as a computing company.
As such, the analyst reiterates a Buy rating on NVDA with a price target of $155, which represents a 7% increase from where the shares last closed.
One reason Ramsay praises NVDA’s Max-Q gaming move is as an offensive counter-punch against the competition, highlighting, “As competitor AMD begins to market integrated CPU/GPU single-chip gaming systems, we believe the Max-Q program will prove critical for NVIDIA to maintain leading market share in the emerging gaming notebook market.”
Especially as NVDA’s datacenter segment continues to be a standout for the company, the analyst projects sales surpassing $4 billion are achievable by 2020, compared to present-day where the company’s run rate circles $1.7 billion. Noting secular gaming trends across the world are only growing, the giant is in excellent standing “[…] to play a vital role in AI computing in support of autonomous vehicles. Even as the company approaches more challenging year-over-year growth comps later in fiscal 2018, the analyst nonetheless stays the course with his fiscal 2018 non-GAAP EPS forecast of $3.57.
“While neither announcement changes our overall thesis or estimates, we do believe both announcements continue to broaden the NVIDIA ecosystem and increase the runway for Pascal and Volta adoption in gaming notebooks and in the datacenter. […] Overall, following strong Q1/F’18 results and the positive analyst day and Volta launch events on May 10, we believe our overall bullish thesis on GPU computing continues to accelerate (particularly data center) and we believe NVIDIA’s emergence as a platform computing company (of which gaming is just one important piece) is now cemented,” Ramsay contends.
TipRanks analytics show NVDA as a Buy. Based on 22 analysts polled by TipRanks in the last 3 months, 12 rate a Buy on NVDA stock, 8 maintain a Hold, and 2 issue a Sell on the stock. The 12-month average price target stands at $129.35, marking a nearly 10% downside.
Intel PC Revenue Keeps Top Analyst Cautious Despite Core X Line-Up
Intel is a different story from the rest, with Ramsay surveying the chip giant from the sidelines, needing to see more concrete evidence that the company’s investments will pay off. Following the Computex conference, even intrigued by the company’s new desktop processor Core X-series, targeting the high-end gaming market, the analyst reiterates a Hold rating on INTC with a $38 price target, which represents a 5% increase from where the shares last closed.
Ramsay pinpoints his concerns on waning PC revenue, underscoring, “While we believe the Core X-series is an impressive lineup and incrementally expands the breadth of Intel’s dominant portfolio at the high end, we maintain our HOLD rating and previous estimates as we continue to believe Intel’s PC revenue will remain in a modest secular decline. In particular, we model PC sales down ~3.6% in 2017 and down ~3.0% in 2018 in a largely flat TAM and believe these slow declines are actually a testament to Intel’s strong portfolio and expanding desktop ASPs as sales should prove largely resilient as AMD launches its first n-node Ryzen desktop and notebook products this year. Combined with the launch of certain 10nm notebook products and the new Skylake/Purley server platform, we anticipate stronger 2H/17 results for Intel overall.”
Ultimately, though the analyst sees potential in an Intel investment, he believes the path to success it not clear-cut enough quite yet, indicating, “However, while we concede Intel shares generate a strong yield and remain inexpensive, we believe shares could remain range bound as overall gross margins stagnate and until investors see proof that new investments in 10/7nm, FPGAs, auto, IoT and memory are capable of generating strong returns within a reasonable horizon.”
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Matt Ramsay has achieved a high ranking of #37 out of 4,567 analysts. Ramsay upholds a 70% success rate and collects 26.0% in his average return. When suggesting NVDA, Ramsay gains 146.0% in average profits on the stock. When rating INTC, Ramsay earns 10.9%.
TipRanks analytics reveal INTC as a Buy. Out of 20 analysts polled by TipRanks in the last 3 months, 11 are bullish on Intel stock, 7 remain sidelined, and 2 are bearish on the stock. With a return potential of 12%, the stock’s consensus target price stands at $40.53.