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A Solid Beat And Raise Quarter For Broadcom Led By Wireless Segment

Avago Technologies Limited NASDAQ:AVGO, Apple Inc. NASDAQ:AAPL - A Solid Beat And Raise Quarter For Broadcom Led By Wireless Segment

Barclays maintains its Overweight rating on Broadcom Ltd AVGO 2.25% after the company delivered another beat and raise quarter as rising dollar content in the upcoming Apple Inc. AAPL 0.94% iPhone launch led to a strong rebound in wireless segment.

For the October quarter, Broadcom guided to revenue of $4.1 billion at the mid-point, 1 percent above the Street at $4.06 billion.

Gross margin was guided up 10bp to 60.5 percent, 30bp above the Street at 60.2 percent. Implied EPS for the October quarter is $3.34 at the mid-point, 5 percent or $0.15 above the Street at $3.19.

"We do believe the IP7 cycle will cause some near-term choppiness, but we would highlight AVGO's visibility into content gains for the next several years in both cellular and connectivity, particularly into a better cycle next year," analyst Blayne Curtis wrote in a note.

Curtis still believes Broadcom will eventually outperform given its superior revenue and earnings growth outlook. The analyst now looks M&A and increased capital returns as catalysts given the company is at its target 2x leverage.

The analyst raised his full-year EPS view to $11.33 from $11.04 and price target to $205 from $185.

"Net net, AVGO remains one of our favorite names offering secular growth, further operational leverage, and capital returns at one of the lowest valuations in the group," Curtis added.

At time of writing, shares of Broadcom fell 2.57 percent to $172.54.

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DateFirmActionFromTo
Sep 2016BarclaysMaintainsOverweight
Aug 2016BarclaysMaintainsOverweight
Aug 2016CitigroupAssumesBuy

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