Broadcom (BRCM) Stock Hit a 52-Week High Today After Analyst Upgrade

NEW YORK (TheStreet) -- Shares of Broadcom Corp (BRCM) are rising 1.8% to $41.89 in afternoon trading Thursday, hitting a new 52-week high following the chip maker's upgrade to "buy" from "neutral" by analysts at Goldman Sachs this morning.

Analysts at the firm said the company's profits are likely to surpass expectations in the second half of 2015 and in 2016, with the help of product trends, and raised its price target to $48 from $40.

Goldman Sachs also cited Broadcom's data center upgrades, bandwidth expansion for new TVs and digital content, as well as the growth in the number of connected devices.

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The firm expects Broadcom's gross margins to expand as higher margin infrastructure products make up a greater proportion of its products.

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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