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Broadcom's Not Cheap, But it's Far From Expensive

Then again, Broadcom has the advantage being a parts supplier not only to Apple (AAPL - Get Report), but also Samsung. This is interesting to note, because ahead of Apple's Q1 report, there were concerns about Apple's supply chain issues, which caused analysts to cut estimates.

Plus, since Apple eventually missed revenue projections, it's possible to suspect that this also impacted Broadcom's revenue to the extent of the 2% sequential decline. Then again, with Broadcom's relationship with Samsung, which is the leader in worldwide unit sales, this should have served as an offsetting scenario.

In that regard, it's disappointing that the company guided Q1 revenue lower than Street estimates $1.9 billion versus $2 billion. But chips are only one part of Broadcom's revenue stream. The company also does well in the realm of networking where one of its biggest customers includes Cisco (CSCO).

Broadcom is also involved in satellite and VoIP components as well as set-top boxes. At some point these markets should also see a slight rebound -- helping Broadcom generate more revenue beyond what it generates as a component supplier.

As I noted, the stock is far from cheap, but there is considerable value left for investors who are willing to be patient. The stock can easily approach $40 by the second half of the year -- representing a 20% gain. In the meantime, the company just declared an 11 cents quarterly dividend, or 10% higher than the previous disbursement.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a private investor with an information technology and engineering background and has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
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