After rising more than seven-fold in the past five years, shares of chip supplier Broadcom Ltd. (AVGO) have fallen about 9 percent from their all-time high in November and they dipped further on Friday on concerns that slowing iPhone sales will hold back its growth. But several Broadcom bulls say the stock is poised to rise as much as 35 percent as revenue is fueled by the widespread adoption of next-generation wireless technology, as reported by Barron's.
The meteoric rise in Broadcom's shares in recent years stalled as it pursued a takeover attempt of rival Qualcomm Ltd. (QCOM). In March, Broadcom's bid was denied by President Trump on national security grounds. (See also: Why Broadcom Will Make $10 on Every iPhone: JPM.)
Street Underestimating AVGO's Booming 5G Wireless Tech Business
Broadcom has risen by nearly 6% over the last month compared to a 4% gain in the S&P 500, but the stock fell on Friday after it reported earnings that dramatically beat analysts' estimates as revenue growth was slowed by weak iPhone sales at major customer Apple Inc. (AAPL). However, bulls including Rosenblatt Securities' Hans Mosesmann, view the recent weakness as an opportunity to buy shares of the semiconductor manufacturer at a discount. Broadcom said its revenue will remain strong as large data providers and companies sharply expand their infrastructure. “Management remains bullish on its strategic positioning and content expansion going forward as RF complexity continues to increase into 5G platforms in the coming years," he said.
Mosesmann is particularly upbeat about Broadcom's 5G wireless technology business. He views the growth potential of this business as wildly underestimated by his peers, who view the segment as "fundamentally a 'mid single' digit sales grower." He expects Broadcom's shares to increase 36% over 12 months to $350.
'Well Positioned To Gain Share'
Canaccord Genuity analyst Mile Walkley is similarly bullish. Walkley did note that weakness in iPhone sales is likely to persist until new product launches in September. Nonetheless, he expects the stock to gain about 30% to $335. He says the company's business for "wired chips," such as those for network switches, remain "well positioned to gain share in targeted end markets," he said, per Barron's. Overall, he views "healthy ongoing growth trends" as driving sales and profits at Broadcom.
A handful of other analysts are bullish on the stock, including Morgan Stanley's Craig Hettenbach, who rates it at overweight with a $320. And RBC Capital's Amit Daryanani has a top rating on the stock. (See also: 3 Stocks for Whether Economy Grows or Slows: Barron’s.)
Broadcom's shares were down Monday morning but were up nearly 1% as of 1:15pm in NYSE trading.