Canaccord Genuity’s Bobby Burleson late yesterday initiated coverage of Broadcom (BRCM) with a Buy rating and a $45 price target, a day after the company reported better-than-expected Q4 results and a Q1 view that also topped expectations.
“We see shares of Broadcom moving higher on strength at key Mobile & Wireless customers,” writes Burleson, “resumption of growth for Infrastructure & Networking following inventory digestion and spending delays, and a more constructive stance on dividends.”
Broadcom is entrenched with the dominant smartphone vendors, Apple (AAPL) and Samsung Electronics (SSNLF), he observes. The company’s infrastructure and networking products may start to see a recovery in sales: “We expect revenues will begin to recover following a multi-quarter inventory correction as spending resumes from service providers and lean inventory initiatives are completed.”
And on the payout front, “Use of cash is shifting from buyback to a larger dividend (currently yields 1%), given the stock was down steeply last year despite the buyback.”
Burleson is modeling $7.74 billion in revenue this year and $2.77 in EPS. That’s more or less in line with consensus $7.77 billion and $2.77.
Broadcom shares are up 27 cents, or 0.7%, at $37.13 in early trading.
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