Cowen Boosts PT on Broadcom (AVGO) to $205; 'Beat and Raise' Becoming Par for the Course
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Cowen and Company lifts its price target on Outperform-rated Broadcom Ltd. (NASDAQ: AVGO) from $200 to $205 following Q3 results released on Thursday night.
Analyst Timothy Arcuri offered the following commentary:
AVGO has been our top pick since initiating and [the company's quarterly] call continued to reinforce and validate our conviction. The company collected ~$600MM from divestitures and paid down $1.3B of long-term debt while taking advantage of favorable credit markets to refinance loans at lower rates, all which should accelerate capacity and appetite for the next M&A opportunity. Once again, AVGO beat and guided above the Street, as it saw strong demand coming from wireless on timing of the iPhone 7 ramp and content gains on flattish cycle units while wired infrastructure is expected to remain flat and enterprise storage is seeing signs of a recovery. FQ4 wireless was guided up ~30% representing stronger than expected content gains and perhaps a pull in of
On data center switching, the company commented that Tomahawk is only ~1/3rd ramped and supply constraints should be resolved by the end of FQ4:16 while Jericho is only ~20% ramped. Both 25G/100G solutions set up the business well for next year with the coming 100G wave in the data center. Importantly the company is on track to meet its 40% OpM target by the end of next Q and indicated that there is some leverage in both GM, as the company transitions to 8" FBAR wafers and goes towards an ownership model for test equipment, and OPEX where there is room for a ~$30MM reduction in the 1H:F17.
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