How Will Avago (AVGO) Stock Be Helped By Sale of LSI's Axxia Networking Business to Intel (INTC)?

NEW YORK (TheStreet) -- Avago Technologies (AVGO) will sell LSI's Axxia Networking Business to Intel (INTC) for $650 million in cash.

The Axxia business mainly includes networking and infrastructure products for wireless networks and enterprise gateways.

Avago, which designs and develops analog semiconductors, bought LSI in December last year for $6.6 billion, and has been divesting units as it seeks to counter volatility in its main wireless business and focus on the fast-growing storage chip market, Reuters reports.

 

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 these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 24.7%. 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 58.92%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.53% is above that of the industry average.
  • Net operating cash flow has increased to $251.00 million or 31.41% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.39%.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Semiconductors & Semiconductor Equipment industry average. The net income increased by 39.8% when compared to the same quarter one year prior, rising from $113.00 million to $158.00 million.
  • Powered by its strong earnings growth of 35.55% and other important driving factors, this stock has surged by 86.72% 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

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