California-based Broadcom (AVGO) is a global supplier of semiconductor components and provider of infrastructure software. Its solutions power data center, telecom, cybersecurity, and factory automation applications.
Broadcom reported a 15% year-over-year increase in revenue to $7.4 billion for its Fiscal Q4 2021 ended October 31. It posted adjusted EPS of $7.81 versus $6.35 in the same quarter last year and beat the consensus estimate of $7.41.
The company ended Q4 with $12.2 billion in cash. It plans to distribute a quarterly cash dividend of $4.10 per share on December 31 and has set December 21 as the ex-dividend date. Additionally, Broadcom has unveiled a new share repurchase program of up to $10 billion.
With this in mind, we used TipRanks to take a look at the risk factors for Broadcom.
Risk Factors
According to the new TipRanks Risk Factors tool, Broadcom’s main risk category is Finance and Corporate, representing 22% of the total 45 risks identified for the stock. Production and Legal and Regulatory are the next two major risk categories at 20% and 18%, respectively.
The company reminds investors in an updated Legal and Regulatory risk factor that the nature of its business subjects it to complex regulations. It mentions that the U.S. government may prohibit the sale of its products to certain customers or countries. For example, it cites the restrictions on doing business with Huawei. As a result, it cautions that it may incur significant expenses to comply with the regulations or remedy violations. Furthermore, the company cautions that the stringent regulations could cause it to lose revenue.
Broadcom tells investors that the focus on corporate social and environmental responsibility is increasing in its semiconductor industry. It mentions that some customers are setting social and environmental responsibility requirements for their suppliers. As a result, Broadcom cautions that a customer may stop purchasing its products, or investors may sell their shares if its social and environmental practices fall short of expectations.
The Finance and Corporate risk factor’s sector average is 40%, compared to Broadcom’s 22%. The Legal and Regulatory risk factor’s sector average is 17%, compared to Broadcom’s 18%. Broadcom’s stock has gained 45% year-to-date.
Analysts’ Take
Following Broadcom’s Q4 earnings report, Morgan Stanley analyst Joseph Moore reiterated a Buy rating on Broadcom stock and raised the price target to $723 from $572. Moore’s new price target suggests 13.87% upside potential.
Consensus among analysts is a Strong Buy based on 21 Buys and 2 Holds. The average Broadcom price target of $680.55 implies 7.18% upside potential to current levels.
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