Expectations are fairly high for Broadcom Inc (Nasdaq: AVGO) when the company reports earnings on June 7. Broadcom stock is up 13 percent since the company pre-announced lower-than expected fiscal third-quarter guidance on April 30, and analysts say there’s plenty for long-term investors to love about AVGO stock.
Analysts are expecting Broadcom to report second-quarter earnings per share of $4.76. Analysts are also calling for revenue of $5.01 billion, up 19.2 percent from a year ago. In April, Broadcom pre-announced second-quarter revenue of $5 billion, plus or minus $25 million.
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Investors will also be watching for any updates to third-quarter guidance. Broadcom pre-announced third-quarter revenue of $5.05 billion, plus or minus $75 million. Analysts had expected $5.24 billion.
Broadcom stock dropped more than 12 percent in the opening months of 2018 after President Donald Trump blocked the company’s proposed acquisition of Qualcomm ( QCOM) due to national security concerns. Investors were also troubled by mixed reports about Apple ( AAPL) iPhone demand. Broadcom is a major chip supplier for the iPhone and derives roughly 10 percent of its total revenue from Apple.
Bank of America analyst Vivek Arya says strength in Broadcom’s wired data center and enterprise storage segments are offsetting weakness in its wireless segment. Arya says Broadcom has multiple positive catalysts in the near term, including a bottoming in Apple’s market sentiment, the reinstatement of Broadcom’s buyback program and a potential resolution to the ongoing trade disputes between the U.S. and China.
Bank of America is expecting in-line EPS from Broadcom on June 7, but Arya says buybacks and potential acquisitions will be the primary drivers for the stock.
“Longer term, AVGO has to get back to growth, and if that’s not coming from Apple, it has to come from somewhere else otherwise we would be concerned that AVGO’s P/E multiple expansion might be impaired,” Arya says.
Bank of America is forecasting full-year fiscal 2018 EPS of $19.10 on revenue of $20.74 billion for Broadcom. Arya says the company is among the most profitable semiconductor stocks in the market.
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“The company is well positioned to expand free cash flow substantially as it reduces capex, with increasing potential for shareholder returns,” he says.
Bank of America has a “buy” rating and $285 price target for AVGO stock.
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Broadcom Inc Earnings Preview: What To Expect From AVGO Stock originally appeared on usnews.com
