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Broadcom Stock Gains As JPMorgan Reiterates Overweight Rating Ahead of Earnings

Broadcom 'remains a semiconductor powerhouse with unmatched scale and technology capabilities,' JPMorgan says

Broadcom  (AVGO) - Get Broadcom Inc. Report shares moved higher Monday after analysts at JPMorgan reiterated their overweight rating on the semiconductor group, citing growth rates in cloud and solid market share in switching and routing markets. 

Analyst Harlan Sur, who has a $585 price target on the stock, said in a research note that he believes Broadcom "is a leader in wireless, datacenter networking, AI/deep learning ASICs, storage, and now infrastructure silicon/hardware/software with broad-based exposure to positive trends in these end markets."

"Broadcom remains a semiconductor powerhouse with unmatched scale and technology capabilities in the industry, securing its leadership positions in a diverse set of end markets," he said.

Sur added that he believes Broadcom’s two-year cadence "will continue to set a high bar for competitors, and drives our confidence that they will continue to retain their >85% share of the $3 billion switching/routing silicon market in cloud/hyperscale datacenters that is targeted to grow at 20%+ CAGR over the next few years."

"Bottom line," Sur added, "Very few competitors have the R&D scale/IP to be able to match the cadence/capabilities of Broadcom's networking silicon franchises and the company continues to stay two steps ahead of its competitors."

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Broadcom shares were marked 2% higher in pre-market trading Monday to indicate an opening bell price of $505.82 each, a move that would extend the stock's year-to-date gain to around 15.6%. 

The group will publish third quarter earnings after the close of trading Thursday, with analyst looking for a bottom line of $6.88 per share on sales of $6.76 billion.

Sur said that in "datacenter switching/routing, Broadcom continues to maintain very high barriers to entry as the team continues to drive a 2x Moore's Law like performance boost with its switching chipset Tomahawk."

Moore's Law refers to a perception by Gordon E. Moore, the co-founder of Intel  (INTC) - Get Intel Corporation (INTC) Report, that the number of transistors on a microchip doubles every two years, though the cost of computers is halved. 

"While many semiconductor companies discuss the slowing of Moore’s law performance cadence, Broadcom continues to drive 2x performance every two years on its flagship switching silicon platforms," Sur said.

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