Avago Technologies (AVGO) Stock Coverage Initiated at Drexel Hamilton

NEW YORK (TheStreet) -- Avago Technologies (AVGO) stock coverage was initiated at Drexel Hamilton with a "buy" rating and a price target of $180. The company makes semiconductors for the cellular, automotive and defense industries.

The analyst action comes after the company recently reported strong second quarter results this year. It reported revenue of $1.645 billion, or $2.13 per share, compared to revenue of $701 million, or 85 cents per share in the same quarter a year ago.

The company's revenue for the quarter was up 134.7% compared to the same quarter last year.

The Singapore-based company also beat analyst estimates. It was expected to report revenue of $1.635 billion, or $2.01 per share, according to analysts surveyed by Thomson Reuters.

Additionally, the company recently announced that it will acquire wireless chipmaker Broadcom (BRCM) for $37 billion, in the biggest technology acquisition ever, according to Bloomberg.

In Tuesday's mid-day trading session, shares of Avago Technologies are dropping 1.87% to $143.87.

Separately, 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 largely solid financial position with reasonable debt levels by most measures. We feel its 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:

  • AVGO's very impressive revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues leaped by 134.7%. 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 63.83%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 20.91% is above that of the industry average.
  • Net operating cash flow has significantly increased by 164.14% to $663.00 million when compared to the same quarter last year. In addition, AVAGO TECHNOLOGIES LTD has also vastly surpassed the industry average cash flow growth rate of 20.26%.
  • 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 117.7% when compared to the same quarter one year prior, rising from $158.00 million to $344.00 million.
  • Powered by its strong earnings growth of 95.08% and other important driving factors, this stock has surged by 103.10% 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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