JP Morgan: Broadcom's Team Is 'Executing Well'

In a report published Friday, JP Morgan analysts Harlan Sur and Bill Peterson went over Broadcom Corporation’s (NASDAQ: BRCM) fourth quarter-earnings report. They consequently reiterated an Overweight rating on the stock and raised their price target from $54 to $55. The stock traded recently at $41.13, down 3 percent.

Related Link: Broadcom Beats Q4 Views On Higher Sales, Fewer Charges

According to the report, “the better top-line result reflects the diversity in the company's end-markets as strong connectivity ramp (into Apple's iPhone 6/6Plus and Samsung Galaxy Note 4), better demand for broadband access products (PON into the China markets), and an in-line decline within the company’s networking business (strong datacenter, stable enterprise, and weak service provider) drove a total revenue decline of 5% Q/Q versus consensus expectations for a 6.5% Q/Q decline.”

The analysts also highlight the fact that Q1 EPS and revenue were better than what the market expected, based on their fears for a noticeable decline in networking.

Moreover, they believe that based on recent research, that the company’s “design win pipeline remains strong." In addition to capturing good dollar content on upcoming Samsung smartphones, Broadcom is working on several large ASIC programs with Apple, and preparing to launch a large networking ASIC product for Ericsson in the second half of 2015.

Similar to the company, JP Morgan estimates 2015 EPS (including stock-based compensation) $3.02 per share. This is why the price target was boosted to $55, based on a 16x multiple.

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