Citi Analyst Raises Broadcom Price Target - TheStreet

Citi Analyst Raises Broadcom Price Target

Sales growth should be above current 12%-14% guidance.
Publish date:

Expecting substantial near-term growth, a Citigroup Smith Barney analyst raised his full-year estimates and price target on cable and satellite company




"It is an open secret that Broadcom's business is doing very well," said analyst Clark Westmont in a research note. New products, such as personal video recorders, gigabit Ethernet and chips for wireless local area networks are driving sales above second quarter guidance of a sequential 12% to 14% increase, he said. Further, in the first quarter, the company reported a 11% quarter-over-quarter increase.

But the news isn't all good for Broadcom. Westmont sees it losing 30% of PC server chipset market share to


(INTC) - Get Report

by the fourth quarter of 2004. This would then diminish the next year's earnings, he said.

Additionally, Westmont warned that investors seem to be focused on Broadcom's near-term prospects, while "the future is a problem for another day." Historically, he said, most chip stock investors overlook near-term issues and focus on longer-term prospects.

Westmont noted that the stock was down below $12 three months ago largely due to challenges in its ServerWorks business. He estimates, however, that unit will bring in more than half of the company's operating profit this year. "Longer-term, investors should monitor the PC server chipset developments closely to determine the feasibility of 2004 earnings projections," said Westmont.

The analyst now expects the company to earn 49 cents a share for the year, up from 37 cents a share. For 2004, Westmont upped his guidance to 70 cents a share, from 60 cents a share. The company's price target goes to $28 from $17.

Shares of Irvine, Calif.-based Broadcom were recently down about 5% at $27.60 in