Shares of Avago Technologies (AVGO) were falling around 3% this morning, following the chip maker�s fiscal fourth-quarter earnings report late yesterday.
Avago said it earned $159 million, or 64 cents a share, up from 61 cents a share a year earlier. Excluding one-time items, per-share earnings were 77 cents, up from 73 cents. Analysts were expecting 67 cents a share. Revenue fell 0.8% to $618 million, in line with the company’s August prediction of about $606 million to $624.2 million.
For the current quarter, the company forecast revenue to be down 5% to 9% sequentially, roughly corresponding to a range of $534.9 million to $613.7 million. Analysts were looking for $606 million.
Analysts are weighing in on the stock this morning, and were overall bullish about the firm�s prospects:
Canaccord�s T. Michael Walkley reiterated a Buy rating and $43 target price: Avago reported strong Q4/F2012 results with mixed Q1/F2013 guidance, as sequentially flat Wireless guidance for the seasonally weaker January quarter was offset by soft Wired Infrastructure and Industrial division guidance. Despite near-term macro headwinds in these divisions, we believe Avago�s proprietary technologies, strong IP portfolio, and diverse customer base in several growth markets position the company for strong long-term growth.
Citi�s Terence Whalen reiterated a Buy rating and $45 price target: AVGO announced plans to �quadruple� FBAR capacity vs. prior outlook for �doubling�. Few Qs focused on this point, but filter mix increase potentially could expand wireless GMs 4% cumulatively the next 2-yrs. Such commitment indicates to us that AAPL and Samsung (50% market volume) have roadmaps that bullishly adopt FBAR. Filters will outgrow power amplifiers by our estimation, making AVGO an attractive long-term RF investment relative to peers SWKS, RFMD, TQNT.
Credit Suisse�s J. Pitzer reiterated an Outperform rating and $42 price target: AVGO reported OctQ (F4Q) rev and EPS modestly above street consensus on Wireless Handset strength (AAPL/Samsung), but guided JanQ (F1Q) down 5-9%, well below street consensus of -1.4%. Weaker than expected Jan driven by Wireline infrastructure (service provider and routers), and modestly worse Industrial as channel continues to deplete inventory. Despite headline weakness for JanQ, consistent with many of the company presentations over the last three days at our annual technology conference, there are signs of stabilization/recovery on the horizon. We would highlight (1) continued strength in Wireless and a doubling of current FBAR capacity expansion plans for FY13 (4x expansion relative to FY11) to support continue proliferation of LTE handsets, (2) expectations of some modest restocking of inventory off extremely low levels, and (3) leverage from lower OpEx and GM tailwinds as Wireless FBAR mix becomes more favorable. While we are trimming estimates from $2.80 to $2.70, we see some optimism around a cycle bottom and continue to argue AVGO provides a healthy balance of new growth leverage in LTE handset deployments and a solid Industrial business which should be margin accretive as revenue growth resumes.
Deutsche Bank�s Ross Seymore�reiterated a Buy rating but lowered his target price by $1 to $40: AVGO delivered solid F4Q results driven by better FBAR/FEM ramps in Wireless (revs +30% q/q). However, F1Q guide was soft primarily on continued weakness in Wired. While the co is not immune to macro, we believe our growth thesis remains intact as Industrial and Wired segments are poised to rebound next year adding to continued Wireless outperformance. Overall we see upside in AVGO shares given its superior growth potential, focus on cash returns to shareholders and discount valuation. Consequently we reiterate Buy.
Lazard Capital Market�s Ian Ing reiterated a Buy rating but lowered his target price $1 to $44: The optics on guided metrics may appear negative (revenues, gross margins, OpEx). However, we believe industrial and wireless segment fundamentals remain intact, as seen with distributor resales continuing to grow a third consecutive quarter (i.e. sell-in revenue recognition eventually catches up to true demand) and an expected quadrupling in FBAR capacity from FY11 to the end of FY13. We do have a more cautious stance on a wireline recovery, given that their carrier routing exposure likely has a strong China component which may be lumpy.
Longbow Research�s JoAnne Feeney reiterated a Buy rating and lowered her target price by $3 to $43: Strong growth prospects over next 3-4 Qs: a. Wireless capacity expansion timed to match customer product ramps (doubling FBAR capacity by mid-2013 and doubling again by early 2014) b. Global investments in telecom resuming (AT&T, VZN, China later, Europe later � backhaul and LTE). {DETAILS: Current investments in Edge routing, next up is a return to Core routing where AVGO has greater content and higher margins.}c. Resumption of investments in Cloud Computing {data traffic growing; need larger supporting infrastructure}d. Recovery of Industrial�looks like last round of inventory reductions this Q in the channel; resales have been flat-to-slightly-up the last three Qs.
Miller Tabak�s Brendan Furlong reiterated a Buy rating and $41 price target: We remain positive on AVGO as we see the company outperforming peers in the semiconductor market. AVGO�s core revenue outperformed peers in the October quarter and we expect this to continue into next year. The company remains very well positioned to capture smartphone growth at all leading OEM�s with RF components.��AVGO also stands to capture upside in design wins and revenue on the industry shift to LTE, as OEM�s are compelled to use AVGO�s filter technology. The current high levels of capex on FBAR filter capacity is testament to 3G and LTE demand for AVGO�s technology next year and beyond. Wireline and Industrial revenues are performing about in line to better than peers and we see the decline is sales from these two segments as largely anticipated by investors.
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