Avago May Be A Way To Play The Next iPhone

The best way to play the iPhone's strength may be with Avago, according to JMP Securities analyst Alex Gauna. Gauna argued that expectations for Avago are "muted" – the result of "misplaced concerns" on tough year-over-year comparisons, content slippage and Chinese exposure.

Instead, Gauna furthered the view that Avago would see "sustained" growth. He pointed not just to strength in Apple Inc.'s AAPL iPhone 6S and iPhone 7, but to Avago's enterprise storage business. He called that segment a "positive surprise," noting that a strength in cloud computing is a powerful tailwind.

Finally, Gauna applauded Avago's "expense control" and "execution" on past acquisitions. That plays into the company's deal to acquire Broadcom Corporation BRCM, which should close this year. JMP securities said that the deal could lead to $2 in accretion as well, helping Avago's "compelling" valuation.

The new $165 price target reflects a value of 15x 2016 expected earnings of $11. In premarket trading, Avago is 0.25 percent higher.