Neutral on Broadcom - Analyst Blog


We recently maintained our Neutral recommendation on Broadcom Corporation ( BRCM ).

Broadcom is focused on the most innovative technologies related to connectivity, bandwidth and content. The continued expansion of pay-TV and Internet access services internationally, especially in China and India, continues to provide significant opportunity for growth. The Broadband Communications business continues to grow, propelled by global adoption of high-definition pay TV services and increasing consumer preference for HD content

Broadcom is also well positioned in the fast-growing wired and wireless communications markets, with the latest technology solutions for a growing number of connected users that are demanding more content and bandwidth. In particular, strong demand for smartphones and tablets is driving growth for Broadcom, particularly from customers like Samsung and Apple ( AAPL ).

Additionally, the market for wireless connectivity devices is expected to grow, driven by increasing demand of smartphones, tablets, netbooks and digital TVs. Management remains keen on expanding the wireless market, primarily in the 2G and 3G spaces. Broadcom also expects to expand into the 4G market by 2013.

Meanwhile, in the Infrastructure and Network business, demand for video and data continues to outstrip expansion and capacity. Broadcom expects strong adoption of 10-gigabit products by data centers and enterprise customers to continue, driving strong revenue growth.

Although we are positive on Broadcom's product leadership, solid financial performance in the last few quarters and strong cash flow generation, margins continue to be under pressure. This is primarily due to consistent acquisitions and accelerated new product ramps.

Earnings estimates have moved up significantly after the company reported better-than-expected results in the fourth quarter of 2011. We await a better entry point and, therefore, continue to maintain our NEUTRAL recommendation on the stock. Our recommendation is supported by Zacks #3 Rank, which translates into a short-term rating of Hold.

BROADCOM CORP-A ( BRCM ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BRCM

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