Why Bank of America Is Positive about Broadcom’s Earnings Growth
Bank of America on Broadcom
Bank of America Merrill Lynch (BAC) recently shared a number of semiconductor stock names, including Broadcom (AVGO), Inphi (IPHI), Advanced Micro Devices (AMD), and Skyworks Solutions (SWKS), in a research report on Wednesday, October 4, 2017. The investment firm has a positive outlook on these stocks.
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The research team wrote that its price forecast for Broadcom is “based on 20x CY18E Non-GAAP EPS (includes stock comp expense) which is in line with diversified analog peers are trading and justified by AVGO’s industry leading profitability and accelerating FCF growth potential.”
According to BAC, Broadcom has the potential to provide strong earnings growth in the near future. It’s trading at a lower forward PE (price-to-earnings) multiple than the semiconductor industry and the technology sector (XLK). It’s currently trading at a forward PE multiple of 14.3x, while the semiconductor industry is at 20.8x and the technology sector is at 28.4x. The broader market S&P 500 index (SPY) is trading at 25.9x.
Broadcom stock has risen 39.3% on a year-to-date basis as of October 9, 2017. Over the past year, the stock has risen ~40.9%. BAC has raised AVGO’s current target price to $300, which is a 22.0% upside from the closing price on Monday, October 9, 2017.
In the next part of this series, we’ll look at Bank of America Merrill Lynch’s view on Inphi.