We recently reiterated our Neutral recommendation on leading
The company recently updated its guidance, raising the lower
end of its revenue guidance. Amid a weak macro environment, the
positive guidance from Broadcom is quite encouraging. Earnings
estimates have increased.
The company expects revenues to come between $2.0 billion and
$2.10 billion compared to with the previous guidance of $1.95
billion - $2.10 billion.
The increase in guidance was attributable to slightly
better-than-expected revenue in the Mobile & Wireless
The company is focused on innovative technologies related to
connectivity, bandwidth and content, which has enabled it to
capture a large chunk of market share.
Broadcom is well placed in the fast-growing wired and wireless
communications markets, with cutting-edge solutions for a growing
number of connected users, who demand more content and bandwidth.
The company primarily targets important customers for strategic
It The company has entered into agreements with major firms
), Nortel and
). In particular, strong demand for smartphones and tablets are
catalysts for Broadcom. Customers like Samsung, Cisco and
) are ramping new products such as iPhone5 and Galaxy series and
Broadcom is set to capitalize on the same. The market for
wireless connectivity devices is expected to grow, driven by
increasing demand of for smartphones, tablets, netbooks and
The company has consistently delivered strong results.
Broadcom reported adjusted earnings per share (excluding one-time
items) of 57 cents per share in the third quarter of 2012,
beating the Zacks Consensus Estimate by a penny.
However, we remain concerned about the pressure on margins
margin pressure due to the accelerated new product ramps, which
typically carry lower margins early in the product lifecycle,
acquisition related costs and business concentration.
The company currently faces competition from bigwigs like
). QUALCOMM's operating unit, Qualcomm Technologies, Inc.,
recently completed the acquisition of EPOS Development,
Hence, we maintain our Neutral recommendation. Our Neutral
recommendation is supported by a Zacks #3 Rank, which translates
into a short-term rating of Hold.
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