Broadcom a BUY

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Bobby Burleson and David Evanson, Winter, 2012

Canaccord Genuity technology analyst Bobby Burleson initiated research coverage on Broadcom (BRCM) today with a BUY rating and $45 price target. He sees shares of the company moving higher “on strength at key Mobile & Wireless customers, resumption of growth for Infrastructure and Networking [businesses] following inventory digestion and spending delays, and a more constructive stance on dividends.”

Mr. Burleson noted four key points contributing to his rating and target were:

Key Mobile & Wireless customers are taking share. Broadcom, through its combo chips and other mobile solutions, is nicely levered to dominant smartphone vendors Apple and Samsung.

Infrastructure & Networking unit is poised for recovery. We expect revenues will begin to recover following a multi-quarter inventory correction as spending resumes from service providers and lean inventory initiatives are completed.

Recent acquisitions should contribute to growth. Broadcom has continued its tradition of addressable market expansion through acquisitions with its purchases of NetLogic, Provigent and Gigle, among others.

Dividend is increasing. Use of cash is shifting from buyback to a larger dividend (currently yields 1%), given the stock was down steeply last year despite the buyback.