Broadcom Update

BRCM : NASDAQ : US$29.51
Target: US$35.00

Broadcom is a global leader in semiconductor products for wired and wireless communications. Broadcom operates in three key business groups: Mobile & Wireless, Infrastructure & Networking, and Broadband Communications.
All amounts in US$ unless otherwise noted.

Technology — Hardware — Semiconductor Devices and Related Technologies
Investment recommendation
We reiterate our BUY rating and raise our price target to $35 for BRCM following our tour of the company’s booth at CES and discussions with management. While it is has become increasingly clear that BRCM’s product breadth is enabling design wins in Mobile and other verticals by allowing OEMs greater design flexibility, we believe many investors remain on the sidelines. We expect BRCM’s recently-announced LTE win with Samsung, and mid-year sampling of their new LTE thin modem to drive multiple expansion as investors become more constructive on BRCM’s LTE and 802.11ac prospects, and as semis as a group come back into favor. If improved, the macro for carrier spending could offer additional upside by driving higher op margin Infrastructure demand.
Highlights LTE and product breadth at CES
Impressively, BRCM was able to demo a working CAT 6 LTE modem at CES, with 300mbps downlink and 50mbps uplink, carrier aggregation, WiFi handoff, sampling by mid-2014. The company is seeing the lower end market adopting LTE in 2014, which triggered Nokia Renesas modem acquisition. Management is also excited about the continuing product cycle in WiFi driven by further proliferation of 802.11ac in 2×2 and 1X1 configurations. Broadband continues to push into emerging markets with low end STB ramping with advanced HD features.
BRCM’s price target of $35 (was $32) is 12x our C2014 EPS estimate of $2.72 plus net cash of $1.68/share.


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