NEW YORK (TheStreet) -- Shares of Broadcom Corp (BRCM) were lower by 3.04% to $55.42 on heavy volume in early market trading Thursday, after the company agreed to be acquired by Avago Technologies (AVGO) in a cash-and-stock deal valued at $37 billion.
Avago is offering Broadcom shareholders $17 billion in cash and shares of Avago valued at $20 billion.
The takeover offer values Broadcom at $54.50 per share.
Yesterday, shares of Broadcom closed at $57.16 per share.
Prior to the official deal announcement, analysts at CLSA downgraded Broadcom this morning to "outperform" from "buy" due to valuation.
The firm added that it would not rule out a competitive bid for the company.
About 20.05 million shares of Broadcom have changed hands as of 9:59 a.m. ET today, compared to its average trading volume of about 8.64 million shares a day.
Irvine, Calif.-based Broadcom is a global semiconductor solution for wired and wireless communications.
The company provides system-on-a-chip, and software solutions, operating under segment including broadband communications, mobile and wireless, and infrastructure and networking.
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 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