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Broadcom ( AVGO ) CEO Hock Tan satisfied querying minds Thursday, claiming that further M&A following the $37 billion merger with fellow Apple ( AAPL ) supplier Avago Technologies is “furthest from our minds at this point.” Top-line growth will slow to 5% in the long term as Broadcom digests Avago , MKM analyst Ian Ing wrote today in a research report. But the merged company’s diversification — which puts wired sales on top — will help offset a wireless trough in Q2, he said. Ing retained his buy rating and boosted his price target to 162 from 160 on Broadcom stock, which was up 7%, around 147, in afternoon trading on the stock market today , touching a 2016 high. For its fiscal Q1 ended Jan. 1 — before the completed Feb. 1 merger — Broadcom late Thursday reported non-GAAP figures of $2.41 earnings per share on $1.78 billion in sales, up 15% and 8%, respectively, vs. the year-earlier quarter. The consensus estimates of 30 analysts polled by Thomson Reuters were $2.30 and $1.75 billion. Current-quarter sales ex items guidance for $3.55 billion at the midpoint was slightly off the consensus model for $3.75 billion. Unlike Q1 figures, Q2 sales reflect the combined Avago-Broadcom company, Tan said on the company’s earnings conference call. Pacific Crest analyst John Vinh credited Broadcom’s 11-cent Q1 EPS beat to $30 million to $40 million in acquisition-related synergies. In total, Broadcom expects $750 million in synergies over 18 months. FBR analyst Christopher Rolland sees Broadcom exceeding that $750 million target. As Broadcom looks to shed smaller business units, the chipmaker expects to reduce quarterly operating expenses by $80 million. For the April quarter, Broadcom guided to $832 million in op-ex, below the consensus for $944 million, Ing wrote. Wired sales are expected to comprise 55% of Q2 revenue, leading wireless, enterprise storage and industrial sales at 23%, 17% and 5% of sales, respectively. The expectations flip Q1 results, where enterprise storage sales led with 38% of total revenue. Wireless, wired and industrial contributed 32%, 22% and 8%, respectively. During Q1, strong enterprise storage sales helped offset a 15% sequential decline in the wireless segment, Tan said. Wireless sales fell on wavering Apple iPhone demand, despite Samsung’s Galaxy 7S ramp-up, but Tan expects to increase Broadcom’s iPhone 7 content by 20%-plus after Q2. “Despite weaker-than-expected Q1 iPhone builds that have weighed on the entire Apple supply chain, Broadcom not only maintained its full-year RF (radio frequency) growth forecast, but raised it,” Rolland wrote. Rolland maintained his outperform rating and 185 price target on Broadcom stock. Vinh rates Broadcom stock as overweight and has a 170 price target. Shares of fellow Apple suppliers Skyworks Solutions ( SWKS ), NXP Semiconductors ( NXPI ), Qorvo ( QRVO ) and Cirrus Logic ( CRUS ) were up a respective 6%, 5%, 3% and 2% in afternoon trading Friday, after Broadcom’s Q1 earnings. Scalper1 News
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