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Avago's Heading to $45

What's more, as with Broadcom, Avago also has a strong networking business, which grew in the recent quarter by 16% year over year, helped by better-than-expected shipments of Cisco (CSCO) equipment. However, and perhaps even more impressive than the revenue growth, is that with the 19% sequential surge in operating income, Avago is turning itself into a strong profit producer. On a non-GAAP basis, that figure was closer to 21%, which was enough for a 9% beat.

Another thing to consider is that given how strong of a quarter this was, management still raised guidance -- suggesting the company doesn't expect this momentum will be stunted anytime soon. Although Qualcomm has a strong lead in this market and offers similar-to-greater advantages in its partnerships with Apple and Samsung, I believe the near-term share gain opportunities are greater in Avago.
[Read: <a target="blank" data-add-tracking="true" href=""><em>What 3 Financial Experts Would Do With Your Last $1,000</em></a>]

Skeptics will think that I'm being a bit too optimistic. Nonetheless, Avago has been outperforming its peers over the past three years. During that span Avago has averaged 17% revenue growth versus the group's 7%. Likewise, Avago's earnings growth has consistently exceeded its peers by 2%.

To that end, on the basis of the company's guidance -- which supports my long-term revenue growth rate of 8% to 10% -- I now expect the stock will reach $45 per share in the next six to 12 months. Given the company's expected rebound in it industrial/auto segment, investors would be wise to consider Avago as a solid, long-term play in a sector that is looking for leadership.

At the time of publication, the author was long AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Richard Saintvilus is a co-founder of where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

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