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Actionable news in QCOM: QUALCOMM Incorporated,

The Hot Stock: Broadcom Shows Qualcomm the Love?

Tactic is sensible; strategy somewhat less clear to us. We see AVGO as a FCF and EPS maximizer, so view the business combination as tactically sensible. From a strategic perspective, we highlight AVGO's longstanding approach to acquiring leading franchises, substantially reducing G&A and focusing R&D to deliver profitable growth. This transaction would fit that bill. However, from an end markets concentration perspective, it's a little less attractive. Since we began covering AVGO, one major investor concern has been the company's exposure to the volatile handset market (~30% of sales). As QCOM has ~90% of sales from the handset market, it would take the combined company's exposure to ~65% of sales, potentially challenging our view that AVGO deserves an expanded P/E.

Qualcomm's market capitalization rose to $91.2 billion today from $81 billion yesterday.


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