One Factor Driving Broadcom (BRCM) Stock Up Today

NEW YORK (TheStreet) -- Shares of Broadcom Corp. (BRCM) are up 1.41% to $41.73 in pre-market trading on Thursday after the company was upgraded to "buy" from "neutral" at Goldman Sachs.

The firm increased the price target to $48 from $40 for the American fabless semiconductor company.

Goldman Sachs said product cycles in 2015/2016 should drive EPS upside, and raised the annual EPS estimate to $3.15 from $3.00 for fiscal 2016.

"We expect gross margins to improve with higher Infrastructure mix, helping the P/E multiple to expand," said Goldman Sachs analyst Mark Delaney.

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 several positive factors, 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. 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 revenue growth trails the industry average of 18.4%. Since the same quarter one year prior, revenues slightly increased by 5.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • BRCM's debt-to-equity ratio is very low at 0.18 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 2.49, which demonstrates the ability of the company to cover short-term liquidity needs.
  • The gross profit margin for BROADCOM CORP is rather high; currently it is at 56.24%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, BRCM's net profit margin of 4.33% significantly trails the industry average.
  • Compared to its closing price of one year ago, BRCM's share price has jumped by 55.31%, exceeding the performance of the broader market during that same time frame. 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.
  • BROADCOM CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse 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 ($2.92 versus $0.74).
  • You can view the full analysis from the report here: BRCM Ratings Report
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