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.
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. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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