Broadcom Inc. (NYSE:AVGO) is gearing up to report earnings this Thursday, and many analysts suspect that the semiconductor company’s July reports will show better numbers than the original consensus forecasts.
The optimism exhibited by analysts at JP Morgan, who maintain an Overweight rating and $365 price target, is founded on an uptick in 5G and cloud spending trends, along with “mission-critical enterprise programs,” which they believe make up around “55-65%” of Broadcom’s total revenues. This intuition has formidable reasoning, as the demand for 5G access continues to rise and the need for cloud networking sees unrealized potential especially among cloud/hyperscale customers.
Additionally, while those on the equity research team at Deutsche have a slightly less bullish take on Broadcom (Buy rating and $360 price target), they are confident nonetheless. Analysts from the German bank expect consistency from the leading technological powerhouse, as they anticipate AVGO to report an “in-line to slightly better F3Q,” as Broadcom will likely continue to benefit from near term "demand tailwinds" in Networking and Broadband as well as improvements to the supply chain.
In short, many moving variables are at play this week with Broadcom, however, the financial institutions have strong conviction in an investment in the San Jose semiconductor company, as 5G and cloud-networking efforts continue to ramp up.
“Overall, we continue to believe that AVGO's secular growth tailwinds (400G switching, AI ASICs, rising RF content, etc.), resilient software segment, rising profitability, de-risked balance sheet (cash bolstered, maturities extended) and attractive dividend yield (~4%), should make AVGO shares increasingly appealing to short-term and long-term investors” said the Deutsche Bank analysts.
AVGO is currently up 0.63% in premarket trading to $344.82 due to analysts from JP Morgan and Deutsche Bank expecting earnings to exceed consensus expectations.
Broadcom Inc will report F3Q20 (Oct) earnings on Thursday September 3 after market close.
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