Why Broadcom Is A Favorite At Bernstein, With Or Without Qualcomm

Analysts are still hopeful for a Broadcom Ltd (NASDAQ: AVGO)-QUALCOMM, Inc. (NASDAQ: QCOM) merger, despite Friday reports of delayed bidding until next year.

Over the last week, Canaccord Genuity and KeyBanc both raised their Broadcom price targets, and Bernstein joined the chorus Thursday.

The Rating

Bernstein analyst Stacy Rasgon reiterated an Outperform rating on the stock and increased the price target from $300 to $325.

The Thesis

Broadcom reported a strong fourth quarter Wednesday, with top-line, bottom-line and margin beats, as well as a dividend increase to $7 annually.

Bernstein anticipates additional dividend hikes to around $10 without Qualcomm and “much more” with it. Rasgon also considers the pending acquisition a “potentially significant source of upside for AVGO shareholders." (See Rasgon's track record here.) 

But even as things stand, Broadcom has appeal. Normalized guidance rests above consensus, and headwinds in the wired business are expected to bottom this quarter.

“Broadcom possesses one of the strongest structural stories in our coverage with or without Qualcomm (growth, cash return, operational excellence and inexpensive valuation),” Rasgon said. “It remains our top pick.”

Price Action

Broadcom traded up 2.2 percent Thursday at a rate of $269.60.

Related Links:

After Failed Takeover, Vetr Turns Bullish On Broadcom

Qualcomm Rejects $130 Billion Broadcom Merger Proposal

Photo courtesy of Qualcomm.