Broadcom Sustains Fiscal 2019 Guidance, Stock Rises ~10%



Broadcom stock reacts to earnings release

Broadcom (AVGO) stock rose more than 10% early today, a day after the company reported its fiscal 2019 first-quarter[1.ended February 3] results. It maintained its fiscal 2019 outlook. After Broadcom’s last earnings release on December 6, its stock rose ~14% in a week on the company’s strong fiscal 2019 guidance and 50% jump in dividends.

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Broadcom’s fiscal 2019 first-quarter highlights

In fiscal 2019’s first quarter, Broadcom’s revenue rose 8.8% YoY (year-over-year) and 6.5% sequentially to $5.8 billion, missing analysts’ reduced revenue estimate of $5.84 billion. The revenue growth came as sharp declines in Broadcom’s wireless and enterprise storage businesses were more than offset by double-digit YoY growth in its networking business and the addition of CA Technologies, which brought in quarterly revenue of $1.4 billion.

Broadcom’s non-GAAP operating margin expanded 450 basis points YoY to 52.7% in the first quarter of fiscal 2019. Its FCF (free cash flow) rose 39% YoY to $2.03 billion, or 35% of its revenue.

Broadcom’s fiscal 2019 guidance

Broadcom stopped giving quarterly earnings guidance in fiscal 2019. However, it retained its fiscal 2019 revenue guidance at $24.5 billion and FCF guidance at $10 billion.

During Broadcom’s fiscal 2019 first-quarter earnings call, CEO Hock Tan stated that he expects the semiconductor business to bottom out in the second quarter of fiscal 2019 due to weak smartphone demand. He expects growth to return in the third quarter, driven by new product launches in the wireless and networking markets and recovery in the broadband market. Broadcom’s guidance sent peer stocks Skyworks Solutions (SWKS) and Microchip Technology (MCHP) up 3.9% and 3.2%, respectively.

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