(Bloomberg) -- Broadcom Inc. traded higher Friday after Wall Street analysts across the board boosted their stock price targets for the chipmaker.
The “best is yet to come” for shares of Broadcom after management delivered results that were in-line with expectations despite experiencing significant supply-driven issues, Susquehanna analysts wrote in a note. When taking into account expectations for a pushout of the launch of Apple Inc.’s new iPhone, Broadcom would’ve “significantly beat the Street,” the analysts continued.
The stock rose as much as 6.1% at 9:45 a.m. Eastern time, extending a now 95% rally since the March low to the highest level since January as Wall Street piled on the praise. Piper Sandler called Broadcom its top large cap pick, touting its position over the next 12 to 24 months and raising its price target to $360 from $300.
Despite the broad optimism across Wall Street, Raymond James warned that supply constraints could make it difficult to gauge true end demand. The supply chain worries paired with the later iPhone ramp drove the bank to lower its earnings estimate for 2020 while boosting expectations for 2021.
Here’s what analysts are saying about Broadcom’s results:
Susquehanna, Christopher Rolland
“Headline guidance was generally in-line, but when adding back the disty inventory drawdown, supply issues and iPhone pushout, Broadcom would have significantly upsided the Street, a positive.”
While there was a sharp increase in bookings, “management also acknowledged a portion of this may be driven by supply constraints.”
Sees company having a firm grasp on the potential for “double bookings” with extra bookings not reflected in company guidance.
Maintains positive rating and boosts price target to $360 from $340.
Raymond James, Chris Caso
Wireless commentary from management was lower than expected for July which is likely due to earlier checks suggesting a roughly one month delay for iPhone production, meaning the seasonal ramp will likely be reflected in fiscal fourth-quarter.
“In total, we do expect iPhone content gains to be a revenue catalyst exiting the year, but we fear that, as is the case with others, supply constraints may make it difficult to gauge true end demand.”
Supply chain constraints continue with demand outpacing current capacity. The constraints “could persist beyond the July quarter,” with Broadcom seeing extended lead times.
Rates market perform.
Piper Sandler, Harsh Kumar
Data center and storage markets are likely to see continued strength with the handset business turning up nicely in the October quarter as the new iPhone gets launched.
“Broadcom generated ~$3 billion in FCF, largely due to its controversial software acquisitions. We believe Broadcom is in an excellent position to pay down its debt in the future.”
Expects supply constraints to disappear into the end of the year, though management notes it expects the impact to persist through the July quarter which will in turn leave “some revenue on the table.”
Rates overweight, boosts price target to $360 from $300.
KeyBanc, John Vinh
Broadcom’s solid second-quarter results came alongside softer than hoped third-quarter guidance though “strength in Cloud was a key driver of Networking, Broadband, and Storage, while Software was stable” for the quarter.
Maintains overweight rating, boosts price target to $360 from $290.
©2020 Bloomberg L.P.
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