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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Avago Technologies' Stock Is Worth Holding Right Now

Stocks in this article: AVGO AAPL QCOM BRCM CHL STX LSI

Second-quarter revenue reached $701 million, soaring 25% year over year on the back of strong wireless revenue, which came in stronger than expected. What was not a surprise, however, was the demand increase in Avago's FBAR filters (film bulk acoustic resonator ), which was due to LTE handset growth in China. 

In terms of profits, the company delivered net income of $158 million, or 61 cents per share, up 35% year over year, topping last year's earnings per share of 45 cents. Gross margin was also strong at 51%, advancing more than 6% year over year.

Impressively, Avago was able to deliver a strong beat in every metric, even amid concerns about high-end mobile device saturation and low average selling prices. Until there are meaningful signs of slowing growth in these areas, the stock should continue to do well.

Given that the company expects a rebound in its industrial/auto segment, investors would be wise to consider Avago as a solid long-term play. With shares trading at around $71, investors should punch their ticket for $85, on the basis of long-term margin expansion and a boost for Apple's product refresh cycle.

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


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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