Morgan Stanley on Monday named semiconductor company Broadcom Ltd ( AVGO) a top pick for the second half of 2017.
Morgan Stanley analyst Craig Hettenbach reiterated his "Overweight" rating on Broadcom's stock with a price target raised to $290 from $280, arguing current Wall Street estimates for fiscal 2017 and 2018 are too conservative.
"We see multiple catalysts in the [second half]," said Hettenbach in a note. He hiked his 2017 earnings per share estimates to $15.86 and 2018's to $17.66, up from $15.77 and $17.10, respectively.
One of the first catalysts set to drive Broadcom shares higher is the completion of the company's $5.9 billion deal to acquire Brocade Communications Systems ( BRCD) . Hettenbach sees the purchase, expected to close by the end of the month, adding up to 9% to its EPS.
Broadcom is also set to benefit from Apple's ( AAPL) iPhone 8 sales, as the dollar-value content in the next iPhone is estimated to be 40% higher than that of the iPhone 7, he added.
But, even if iPhone sales disappoint, Hettenbach sees potential in new custom applications such as touch and wireless charging.
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