It’s the merger that some of us have been waiting for a while now. The merger between chip stock Broadcom (NASDAQ:AVGO) and VMWare (NASDAQ:VMW) has finally received Chinese approval and can go through. It’s proven very little in the way of good for either company, though, as Broadcom slumped nearly 1.5% in Tuesday morning’s trading session, and VMWare slid a staggering 4.7% in response.
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The approval, after some delay, finally came down from the State Administration of Market Regulation (SAMR), who offered what might have been some of the most begrudging approval ever seen for such a measure. In fact, that approval came with several strings attached, starting with a clear commitment to “not abuse its position in several areas,” one of which was to ensure that VMWare servers would continue to work with third-party service providers. But the $69 billion merger—which was previously regarded as held up for “political reasons” has now advanced to the next stage.
The Timing Was Perhaps the Most Impressive Part
Interestingly, China’s approval came hot on the heels of a recent meeting between Chinese Premier Xi Jinping and United States President Joe Biden. During the recent APEC Summit, both countries clearly made overtures toward the other, with Biden trumpeting progress between China and the U.S., while Xi, in turn, declared China ready to be “a partner” to the U.S. It’s easy to wonder how much of the Broadcom/VMWare merger was dependent on that particular exchange going well. But regardless, it went well enough because the last major impediment to the deal has been removed.
Which Chip Stocks are a Good Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AVGO stock based on 16 Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 93% rally in its share price over the past year, the average AVGO price target of $984.94 per share implies that the stock is fairly valued.
