AVGO- Embedded Expectations Analysis - 2019 04 05
Broadcom Inc. (AVGO:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with an 18.7x Uniform P/E. Even at these levels, the market has bearish expectations for the firm, and management may be concerned about seasonality in their semiconductor segment, Wi-Fi 6 and 5G technology requirements, and the benefits of their CA acquisition.Specifically, management may be concerned about seasonality in their semiconductor segment, weak Japanese market demand, and semiconductor requirements for Wi-Fi 6 devices and 5G smartphones. Moreover, they may lack confidence in their ability to sustain EPS growth, maintain semiconductor revenue mix, and meet overall revenue guidance. In addition, they may be concerned about potential sanctions for Huawei, their ability to meet the demand of large customers, and the pace of their semiconductor acquisitions. Also, management may be exaggerating profitability improvements and expansion opportunities from their CA acquisition, their positioning as an OEM for cloud providers, and the recovery and stabilization of their broadband business.
Broadcom, via its subsidiaries, is a designer, developer and supplier of a range of semiconductor and infrastructure software solutions. The company develops semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. The company provides products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, and factory automation. The company has three segments: semiconductor solutions, infrastructure software and intellectual property licensing.
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