Broadcom posted better-than-anticipated results for the fourth quarter of fiscal 2020 (ended Nov. 1). However, shares dropped 2.7% in Friday’s pre-market trading session as the chipmaker announced senior management changes.
Broadcom (AVGO) appointed current CFO Tom Krause as the President of its new infrastructure software group. Meanwhile, Kirsten Spears, currently Vice President, Corporate Controller and Principal Accounting Officer, will assume the role of CFO. Also, Charlie Kawwas, currently Senior Vice President and Chief Sales Officer of Broadcom, was named as the COO of the company.
The changes were announced as Broadcom reported 4Q revenue of $6.47 billion, which grew 12% year-over-year and exceeded analysts’ estimates of $6.43 billion. Revenue from its infrastructure software segment rose 36% while the semiconductor solutions segment’s revenue was up 6%. Adjusted EPS increased 18% to $6.35, surpassing analysts’ forecast of $6.25.
Commenting on the 4Q results, CEO Hock Tan said “We concluded the year with strong fourth quarter results driven by continued demand for networking from cloud and for broadband from service providers as well as the significant ramp in wireless, even as enterprise demand remained soft. Our infrastructure software segment continued to be stable and delivered solid results.”
Looking ahead, Broadcom expects 1Q21 revenue of about $6.6 billion and adjusted EBITDA of about $3.9 billion. (See AVGO stock analysis on TipRanks)
Following the earnings release, Mizuho Securities analyst Vijay Rakesh boosted the stock’s price target to $460 from $425 and reiterated a Buy rating. In a research note to investors, Rakesh commented, “AVGO noted OctQ strength from wireless ramps with iPhone as well as continued networking and broadband demand from cloud and service providers, and JanQ upside with further acceleration in wireless expected up ~50% y/y with peak iPhone ramps and continued broadband strength.”
The analyst added “With industry-leading GMs/OM at ~74%/56% and FCF/year ~$11-12B, we believe software will be a key focus with M&A on the horizon and former CFO Tom Krause now leading infrastructure software.”
The rest of the Street is in line with Mizuho’s bullish outlook on the stock. The Strong Buy analyst consensus is based on 8 Buys and 2 Holds. The average price target of $458.13 indicates upside potential of 11.7% over the coming year. Shares have risen 29.6% year-to-date.
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