4 Broadcom Analysts Dive Deep Into Chipmaker's 2 Key Growth Areas, Valuation And Near-Term Catalysts

Broadcom Inc. AVGO shares are higher Friday after the chipmaker reported strong fiscal-year 2021 third-quarter results.

The Broadcom Analysts: Rosenblatt Securities analyst Hans Mosesmann reiterated a Buy rating on Broadcom and increased the price target from $550 to $600.

KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating and increased the price target from $565 to $575.

Raymond James analyst Chris Caso reiterated a Market Perform rating.

Credit Suisse analyst John Pitzer maintained an Outperform rating and $580 price target.

The Broadcom Theses:

Enterprise and Broadband Are Inflecting, Rosenblatt Says: Broadcom's solid quarterly results were driven by broad-based infrastructure silicon, in particular networking and broadband, and enterprise software, Rosenblatt analyst Mosesmann said in a note.

The outlook for the fourth quarter, the analyst said, incorporated structural shifts and inflection in enterprise and broadband within the context of pervasive supply shortages.

"We like the excellent execution and early engagement with suppliers in customers to deal with the current environment amidst multiple product/market cycles," the analyst said.

Related Link: Mizuho's Top Semiconductor Stocks For 2021: Do You Own Them?

Visibility Remains Excellent, KeyBanc Says Enterprise demand, representing about 50% of semiconductor revenues, are improving meaningfully, KeyBanc analyst Vinh said. This revenue is expected to grow by double digits in the fourth quarter, he added.

Demand, according to the company, remains robust, the analyst noted. The company, however, is managing backlog and shipping to end-demand to avoid over-shipping, the analyst said.

"Visibility remains excellent (40- to 50-week lead times) as AVGO remains largely booked out through FY22 with the exception of wireless," Vinh said.

Unchanged Estimates Leave No Room For Rerating, Raymond James Says: Broadcom churned out a solid quarter amid continued supply constraints, Raymond James' Caso said.

Broadcom's management appeared most constructive in two areas which they expect to lead growth into the fiscal year 2022 — enterprise and broadband, Caso noted.

The main bull argument for Broadcom is valuation, at 16 times Raymond James' revised fiscal year 2021 non-GAAP EPS, and about a 3% dividend yield, the analyst said. With estimates largely unchanged, the analyst said he failed to see a catalyst for rerating.

Broadcom Shares Are Undervalued, Credit Suisse Says: Broadcom's fundamental drivers, namely Cloud, 5G, AI, WiFi6, COCSIS 3.1, FTH, etc., remain intact, Credit Suisse analyst John Pitzer said.

The stock, the analyst said, is undervalued.

Pitzer sees three near-term catalysts: the "Software Analyst Day" scheduled Nov. 9 in the New York City, dividend increase from $16.06 per share to $16.70 per share at the fiscal year-end, and potential for a $6 billion stock buyback by year-end, provided there is no suitable M&A deal.

AVGO Stock: At last check, Broadcom shares were rising 1.17% to $497.67 on Friday.

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