Broadcom (BRCM) PT Raised to $47 at RBC Capital

RBC Capital analyst Doug Freedman reiterated an Outperform rating on Broadcom (NASDAQ: BRCM) and boosted his price target of to $47.00 (from $40.00) following Q2 results.

Freedman comments, "A strong report, with OpEx savings greater than expected and baseband wind-down on a quick timeline. Revenue growth for 2014 will probably be below industry (we model -0.5% Y/Y) but all financials below top-line more than make up for it."

Positives and Negatives (+): i) better than expected gross margins on wind-down of baseband (55.0% may be new normal)ii) OpEx is lower than expected (~$25mil due to baseband, full run-rate will be $75mil reduction per Q); iii) share repurchase of $800mil over next 12 months; iv) M&W up Q/Q for Q3 (RBC +9.0& Q/Q) despite baseband exit. (-): i) Infrastructure & Networking flat to down Q/Q for Q3 (RBC -1.5% Q/Q)); ii) extent of combo chip share loss still unknown; iii)M&A activity on a large scale ($1bil EV or more) very unlikely given share repurchase/% of cash onshore; iv) High ROI opportunities remain unclear until December Analyst Day.

For an analyst ratings summary and ratings history on Broadcom click here. For more ratings news on Broadcom click here.

Shares of Broadcom closed at $38.75 yesterday.

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