Broadcom’s stock perked up on Thursday after Harsh Kumar, chip analyst at Piper Sandler, reiterated his Overweight rating on the company while upping his target price by 11% to $500. He noted that he just met with Broadcom [$AVGO] CEO Hock Tan and CFO Kirsten Spears, and left “feeling very confident in the company’s long-term strategic direction.”
The Piper analyst asserts that “the near-term set-up” for the semiconductor and software company’s shares could prove to be a lucrative opportunity, given strength in chip demand from both cloud and 5G wireless-handset customers.
“We also see the software segment as an integral part of the company’s strategy,” he added, “and we expect any future acquisitions to be in this space.” Kumar mentioned that Broadcom is cheap relative to its comrades, while offering better financials, and remains his top large-cap stock pick for 2021. Why Broadcom Dipped After Solid Earnings
Kumar said that the company provided increased visibility into different segments of its business. He added its goal was to banish uncertainty about profitability in its software business, and to illustrate the progress of its chip segment throughout the pandy.
“In general, we believe Broadcom has had better success than others in 2020,” he wrote. “Overall, we feel management’s decision to provide additional metrics was the right move, as it should give investors additional insight into each business.” Quibi’s Throwing in the Towel, Specifically to Roku
Broadcom has produced its software business mostly through acquisition, purchasing mainframe-software specialist CA Technologies in 2018 and security-software company Symantec’s enterprise business in 2019. Kumar recognized that Broadcom considers software to be an integral part of its long-term strategy.
“Management has been able to show growth in old software businesses while driving strong profitability,” he noted. “Following our conversation, we walked away feeling the software business is here to stay, with the potential for additional acquisitions down the line. Management made it abundantly clear the focus of future acquisitions would be software, as the company is very comfortable with its positioning in the chip space right now.”