This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Broadcom's Earnings Report May Quell Investors' Fears

NEW YORK ( TheStreet) -- Semiconductor giant Broadcom (BRCM) will report third-quarter earnings results Tuesday, affording management a chance to put some of the rising fears about the company's mobile/wireless business to rest.

In comparison to market leader Qualcomm (QCOM), Broadcom has not had a stellar year. However, contrary to popular opinion, Broadcom's performance has been far from disastrous. The problem: given the "upper-tier level" chip position Broadcom has enjoyed when compared to, say, Advanced Micro Devices (AMD), expectations for the company have been too high.

Broadcom's margins have come under pressure partially because of the steady decline of average selling prices of high-end mobile devices. However, the entire industry is dealing with the same issue.
[Read: <a target="blank" data-add-tracking="true" href=""><em>Why You Should Buy Apple Ahead of Earnings</em></a>]

That Broadcom's stock is down close to 30% because of this factor is a total overreaction. While Broadcom has taken the brunt of this fear, it is not alone. Qualcomm has also been impacted by mobile device saturation.

Even with the sector's prolonged weakness, which produced uninspiring results from the likes of Intel (INTC), Broadcom still managed a 6% revenue growth in the July quarter, including 7% year-over-year growth in the mobile/wireless business. So, despite the recent mobile struggles, management has been making the best of a tough situation.

I do believe, however, that management needs to deliver Tuesday. Only then will the stock get going again. This means not only does Broadcom need to beat on both revenue and profits, but guidance has to suggest that investors' worst fears are over.

The Street will be looking for earnings of 48 cents per share. Seeing that profits have been unstable over the past couple of quarters, it's no surprise that this estimate is 7 cents lower than what it was three months ago. While this might suggest a lack of confidence, I take it as a positive as expectations have been too high. It seems the Street is becoming more realistic.

Revenue, meanwhile, is expected to be flat at $2.13 billion. Although flat growth would be viewed as a negative here, I don't believe it (if achieved) could tell the whole Broadcom story. Focusing solely on this metric would discount what really is a well-diversified operation.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BRCM $0.00 0.00%
AAPL $93.75 -1.10%
FB $117.53 0.69%
GOOG $693.00 0.29%
TSLA $240.76 -2.81%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs