NEW YORK (TheStreet) -- Shares of Broadcom Corp. (BRCM) are up 1.14% to $38.05 in pre-market trade after Oppenheimer (OPY) upgraded the semiconductor company to "outperform" from "perform" with a $45 price target, citing an improved margin and cash flow profile following the exit of the baseband business.
The firm sees multiple catalysts ahead and expects improved capital allocation.
Separately, TheStreet Ratings team rates BROADCOM CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate BROADCOM CORP (BRCM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BRCM's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, BRCM has a quick ratio of 2.30, which demonstrates the ability of the company to cover short-term liquidity needs.
- Net operating cash flow has significantly increased by 56.18% to $606.00 million when compared to the same quarter last year. In addition, BROADCOM CORP has also vastly surpassed the industry average cash flow growth rate of 2.94%.
- The gross profit margin for BROADCOM CORP is rather high; currently it is at 54.54%. Regardless of BRCM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, BRCM's net profit margin of 8.31% is significantly lower than the industry average.
- BROADCOM CORP's earnings per share declined by 15.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, BROADCOM CORP reported lower earnings of $0.74 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus $0.74).
- BRCM, with its decline in revenue, slightly underperformed the industry average of 2.9%. Since the same quarter one year prior, revenues slightly dropped by 1.0%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: BRCM Ratings Report