J.P. Morgan Shines Light on Broadcom Ltd (AVGO) Custom Chip Franchise

J.P. Morgan analyst Harlan Sur is out with a research report on shares of Broadcom Ltd (NASDAQ:AVGO), this time singing the praises of the wireless chip giant not only for the strength of its business in data center, but the caliber of its custom chip (ASICs) franchise, which targets both networking and the consumer, i.e. Apple. It is a joint business that Hur projects brings in over $1.2 billion in yearly revenue, with a company sales total hitting about $16 billion per year.

In light of Sur’s analysis of the company’s stellar ASICs franchise, the analyst reiterates an Overweight rating on AVGO with a $220 price target, which represents a nearly 29% upside from where the stock is currently trading.

As Sur assesses AVGO’s ASICs business, the success hinges on a one-two punch of “classic Avago and classic Broadcom’s,” which from the analyst’s perspective, “is one of the best in the industry, with technology leadership driven by a lot of engineering talent in leading edge design capabilities in big digital system-on-a-chip (SOC) and analog/mixed signal chip designs and a war chest of advanced IP (next generation SERDES, memory compilers, and mixed signal/analog building blocks).”

“We believe Broadcom is working closely with Apple in understanding characteristics at the system/device level in order to make proper design trade-offs, which should provide visibility into future product roadmaps and further secure its incumbent position. In addition to touchscreen technology, we believe Broadcom has strong capabilities in overall analog/mixed signal chip design,” Sur concludes.

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, four-star analyst Harlan Sur is ranked #772 out of 4,185 analysts. Sur has a 58% success rate and yields 6.0% in his annual returns. When recommending AVGO, Sur earns 2.2% in average profits on the stock.

TipRanks analytics indicate AVGO as a Strong Buy. Based on 25 analysts polled in the last 3 months, 100% rate a Buy on AVGO. The 12-month price target stands at $202.14, marking an 18% upside from where the shares last closed.

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