Broadcom (BRCM) makes semiconductors for broadband communications markets, including cable set-top boxes, cable modems, office networks and home networking. Its shares earn a $52 price target, meaning a 15% upside from current prices from Goldman Sachs. That price is based on a price-to-earnings multiple of 20 times the firm's projected earnings estimate of $2.60 per share in 2011.
Broadcom is scheduled to release fourth-quarter earnings Feb. 1 of an estimated 74 cents. Last year it earned 49 cents per share in the quarter. For fiscal 2010, analysts estimate, per Standard & Poor's, earnings of $2.71 a share, growing 8% in 2011 to $2.92 a share.
Broadcom has about a 30% market share of the $4.4 billion connectivity chip market, which includes Wi-Fi, GPS and Bluetooth, and about a 24% market share of the $2.1 billion standalone Wi-Fi chip market. Morningstar notes that the company was sitting on $2.8 billion at the end of the third quarter, took on new debt and so is in prime position to make acquisitions.Both consumer demand and technological innovation are pushing converged devices, such as the Apple iPhone. And Broadcom has demonstrated proficiency for integrating such functions onto a single chip. Standard & Poor's, which has a "hold" rating on Broadcom, said it anticipates sales rose 50% last year and will climb 10% in 2011. "We see expansion of broadband services and IT spending providing long-term growth opportunities for (its) broadband communication and enterprise networking businesses." And recent design wins "for various combination wireless and mobile handset products will help boost mobile and wireless networking sales as its customers ramp production of new products," writes the S&P analyst. Analysts give its shares nine "buy" ratings, 12 "buy/holds," 14 "holds," three "weak/hold" and one "sell," according to an S&P poll of analysts. Shares are up 4% this year.
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