We recently reiterated our Neutral recommendation on Broadcom
Fueled by the broadband communications explosion, Broadcomhas
enjoyed robust growth since its inception. The company 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, provide significant opportunity for growth.
Broadcom is well positioned in the fast-growing wired and
wireless communications markets, with cutting-edge solutions for a
growing number of connected users that demand more content and
bandwidth. In particular, strong demand for smartphones and
tablets, particularly from customers like Samsung and Apple, is
boosting Broadcom's growth.
The company recently launched the industry's first SOC devices
with the potential of 5G WiFi. These chips enable fastest and most
reliable Gigabit connectivity for home and small/medium business
(SMB) networks. These chips will complement the company's full line
of 5G WiFi 802.11ac solutions. With the ever-growing demand
for wireless connectivity ubiquitously, there is increasing
reliance on wireless networks, which in turn, stresses the legacy
802.11a/b/g/n networks. The new 5G WiFi enables mobile device users
to stream digital content between devices faster, and
simultaneously connect more wireless devices to home and enterprise
networks, while conserving battery power.
Earlier, earnings estimates jumped significantly after the
company reported better-than-expected results for the first quarter
Broadcom's product leadership, solid financial performance and
strong cash flow generation continue to be positives. However, we
remain concerned about the pressure on margins due to the
accelerated new product ramps, continuous acquisitions and business
concentration. We await a better entry point, and therefore
continue to maintain our Neutral recommendation on the stock.
Our Neutral recommendation is supported by a Zacks #3 Rank,
which translates into a short-term rating of Hold.
BROADCOM CORP-A (BRCM): Free Stock Analysis
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