Shares of the semiconductor business run by Hock Tan, Broadcom (NASDAQ:AVGO), increased on Friday after it released third-quarter results and guidance above expectations, earning the acclaim of numerous Wall Street analysts.
The forecast and the demand for data centers are two significant positives for the company and the semiconductor industry overall, according to Mizuho analyst Vijay Rakesh, who confirmed the company’s buy rating on the company’s (AVGO) shares.
In a message to customers, Rakesh stated that “[Broadcom] noticed demand remained high across all end markets as customers continue to invest in data center upgrade/refresh and broadband with the Wireless ramp at iPhone ahead.”
The analyst also stated that thanks to the release of Apple’s (AAPL) new iPhone 14, Broadcom (AVGO) expects networking to increase 30% year over year, server and storage to increase 45% year over year, and wireless to increase around 20% sequentially and 10% year over year in the upcoming quarter.
In premarket trading, shares of the company (AVGO) increased by more than 2% to $503.84.
Ross Seymore, an analyst at Deutsche Bank, confirmed his buy recommendation and pointed out that the company (AVGO) had good results amid growing macro and cyclical concerns.
Seymore wrote, “While we do not anticipate [Broadcom] to be completely immune from rising macro headwinds, we believe they can weather the situation better than most due to a consistent cleaning of backlog to ensure shipments are only matching ‘true demand,’ long lead-times on non-cancellable orders, and heavy infrastructure exposure (80% of revs).
The analyst continued by saying that if the economy continues to deteriorate, these “protective” qualities would only gain in popularity.
Reddy Pajjuri, an analyst at SMBC Nikko, increased his price targets for the company (AVGO), adding that the risk-reward ratio is still “very appealing.”
In a note, Pajjuri stated that the company “continues to benefit from secular growth in Cloud/Enterprise/Storage markets as well as iPhone 14 builds in the near term” and that additional advantages included multiple product cycles, a stable software business, and potential synergies from its impending acquisition of VMware (NYSE:VMW).
According to a story from last month, VMware (VMW) was reportedly slowing down purchases in anticipation of Broadcom’s (AVGO) takeover, which worried both salespeople and clients.
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