NEW YORK (TheStreet) -- Broadcom (BRCM) shares jumped 14.92% to $53.68 in afternoon trading on Wednesday following reports that the company is in advanced talks to be purchased by Avago Technologies (AVGO).
The stock is trading on more than triple its three month daily average volume at 21.3 million shares so far today.
The Irvine,CA-based tablet and smartphone semiconductor manufacturer could be the latest takeover target in a semiconductor industry that has seen an accelerated rate of mergers and acquisitions this year, according to the Wall Street Journal.
Industry giant Intel (INTC) is currently in talks to purchase Altera Corp (ALTR).
Broadcom has a market value of about $28 billion while Avago is currently valued at approximately $34 billion.
Earlier today, analysts at Bank of America/Merrill Lynch reiterated their "outperform" rating on the company's shares with a $54 price target. While citing the company's strong fundamentals and impressive WiFi business, the firm believes that the company could go as high as $68 per share.
For the year the firm provided 2015 EPS guidance of $3.08 cents per share, ahead of analysts' consensus $3 estimates. The firm also forecast better than expected 2016 full year EPS of $3.51, ahead of analysts' $3.21 expectations.
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 a few notable 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 revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BRCM's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 3.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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. Along with this, the company maintains a quick ratio of 3.13, which clearly demonstrates the ability to cover short-term cash needs.
- BROADCOM CORP has improved earnings per share by 21.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, BROADCOM CORP increased its bottom line by earning $1.08 versus $0.74 in the prior year. This year, the market expects an improvement in earnings ($3.04 versus $1.08).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 26.7% when compared to the same quarter one year prior, rising from $165.00 million to $209.00 million.
- The gross profit margin for BROADCOM CORP is rather high; currently it is at 56.41%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.15% trails the industry average.
- You can view the full analysis from the report here: BRCM Ratings Report