Broadcom's Earnings Beat Spurs Raft of Analyst Upgrades

Broadcom’s better-than-expected fourth-quarter earnings are greeted with enthusiasm by Wall Street analysts, even as the company warns of slower revenue growth in 2021.
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Broadcom’s  (AVGO) - Get Report better-than-expected fourth-quarter earnings were greeted with enthusiasm by Wall Street analysts on Friday, even as the chipmaker and software infrastructure provider warned that weak spending among its networking and broadband customers will likely ding its 2021 numbers.

Broadcom posted fiscal fourth-quarter net income of $1.32 billion, or $2.93 a share, up from $847 million, or $1.97 a share, a year ago. On an adjusted basis, Broadcom earned $6.35 a share, above the $6.25 a share expected by analysts polled by FactSet.

Sales rose to $6.47 billion from $5.78 billion a year ago.

Analysts were broadly positive on the numbers, despite Broadcom’s warning that weak spending by companies could impact its 2021 results.

Jefferies reiterated its buy rating on Broadcom and lifted its one-year price target to $470 from $420 on what it sees as continued strength in networking and broadband thanks to supply constraints that should continue to drive demand for Broadcom’s products and services.

Susquehanna kept its positive rating on Broadcom with a one-year target of $490, noting that while the company seemingly remains ahead of its peers in addressing supply chain disruptions those supply constraints could cap additional upside.

RBC Capital Markets held its outperform rating and raised its price target to $450 from $410 on what it described as “solid results for both the quarter and guidance,” though cautioned that margins “are continuing to expand and the firm could reach ~60%.”

Morgan Stanley, meanwhile, kept its overweight rating and raised its price target to $495 from $440 on what it sees as “sustainable strong growth” in free cash flow and improved visibility, which should support the stock going forward.

TheStreet's Action Alerts PLUS team had its own positive view, noting the company had an overall "solid" quarter driven by growing revenue from its software segment, which in turn should help expand margins and provide for a recurring revenue stream - "two factors that members familiar with our Apple investment thesis know can lead to multiple expansion over time."

Shares of Broadcom were down 1.26% at $404.88 in trading on Friday.

Broadcom is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AVGO? Learn more now.