NEW YORK (TheStreet) -- Avago Technologies (AVGO) - Get Report stock advanced 2.25% to $132.50 after MKM Partners increased its price target to $149 from $148 and reiterated its "buy" rating for the Singapore and San Jose, CA-based designer, developer and global supplier of a range of analog semiconductor devices.
Research of Avago's end-markets suggest solid demand in support of smartphone builds and broad strength across cloud data center offsetting more problematic areas such as PC client exposure, industrial, and service provider, according to MKM Partners.
"Wireline infrastructure is favorably exposed to cloud data center deployments," said MKM analyst Ian Ing. "Not only is strength coming from the usual North American cloud service providers, but China service providers (Alibaba [BABA, Buy, $93.88, $115 PT], Baidu, Tencent), as well as Taiwan white-box vendors (Quanta Cloud Technology), which are increasingly important customers."
Strength in radio frequency and data center technology should be more than sufficient to overcome weakness in PC client storage, MKM noted.
Separately, Avago reports fiscal second quarter earnings results on Thursday, May 28, after the market close.
TheStreet Ratings team rates AVAGO TECHNOLOGIES LTD as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AVAGO TECHNOLOGIES LTD (AVGO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins, good cash flow from operations, increase in net income and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AVGO's very impressive revenue growth greatly exceeded the industry average of 0.0%. Since the same quarter one year prior, revenues leaped by 133.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The gross profit margin for AVAGO TECHNOLOGIES LTD is rather high; currently it is at 61.68%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.18% is above that of the industry average.
- Net operating cash flow has significantly increased by 110.04% to $481.00 million when compared to the same quarter last year. In addition, AVAGO TECHNOLOGIES LTD has also vastly surpassed the industry average cash flow growth rate of 14.84%.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 161.9% when compared to the same quarter one year prior, rising from $134.00 million to $351.00 million.
- Powered by its strong earnings growth of 130.18% and other important driving factors, this stock has surged by 85.28% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: AVGO Ratings Report