You would be hard-pressed to find a hotter stock in the semiconductor industry than Broadcom (AVGO) - Get Report . Shars, at around $177, have risen by more than 10% and 15% in one and three months, respectively. Expand that horizon by six months and its shares have returned 28% to patient shareholders.
Don't take profits now.
The company's growth momentum helped it crush the 6.47% year-to-date rise in the S&P 500 (SPX) index as well as the tracking sector exchange-traded fund, the iShares PHLX Semiconductor ETF (SOXX) - Get Report . The stock has a buy rating and an average analysts 12-month price target of $193, which implies 9% extra gains from current levels.
Broadcom is set to report fiscal third-quarter earnings after the Thursday close. Wall Street is expecting the Singapore-based company to report adjusted earnings of $2.77 per share on revenue of $3.76 billion. This compares to the year-ago quarter when it earned $2.24 on $1.75 billion.
On Tuesday, Credit Suisse analysts boosted their price target on Broadcom shares to $200 from $180, while assigning an outperform rating on the stock. With the close at $177, that suggests 13% premium based on the $200 price target.
In the second quarter, Broadcom reported an adjusted earnings of $2.53 per share, which beat analysts' projections by 15 cents, while revenue of $3.56 billion grew 45% year over year, beat Wall Street estimates by about $10 million.
Beyond the consistent execution, Broadcom is expected to benefit from the initial builds of Apple's (AAPL) - Get Report upcoming iPhone 7. Credit Suisse expects the company to also benefit from a recovery in not only enterprise data storage, but also better-than-expected growth in wired networks from datacenter build-outs. Citigroup raised its price target on Broadcom to $205 from $160 Tuesday.
In other words, despite the seemingly pricey stock, Broadcom shares can go still higher.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.