rose $1, or 2.8%, to $37.40 in early trading Monday after a Smith Barney upgrade. The stock is now trading near its 52-week high of $37.65.
"Data points over the last two weeks have been pretty positive for Broadcom, including trends in networking, wireless LAN and servers plus emerging growth in Bluetooth," Smith Barney analyst Clark Westmont wrote in upgrading the shares to buy from hold. Bluetooth is a wireless communications standard for electronic devices.
Smith Barney downgraded the semiconductor stock in October, saying that the company's sales growth rate would slow in 2004. Westmont says this still might happen, but that the company is "trending above consensus expectations." Broadcom announced in October that it expected fourth-quarter revenue to grow 7% to 9% over the third quarter. Analysts polled by Thomson First Call were expecting 5.4% growth in the December quarter.
Smith Barney's Westmont now estimates the company will earn 78 cents a share in 2004 vs. its prior estimate of 68 cents a share. He also set a new $40 price target. The 2004 consensus earnings estimate is 70 cents a share with a median price target of $35.50. The new Smith Barney numbers and the consensus both assume that the stock will trade at a price-earnings ratio near 50 at the end of 2004.
Broadcom's stock is now up 125% for the year vs. 72% for the Philadelphia Semiconductor Index.