Broadcom Gets Price-Target Hikes After Closing Brocade Deal

Chipmaker Broadcom (AVGO) received a pair of bullish reports after closing its acquisition of Brocade Communications Systems on Friday.


BMO Capital Markets on Monday resumed coverage of Broadcom with an outperform rating and a price target of 330. RBC Capital Markets reiterated its “top pick” buy rating on Broadcom and raised its price target to 315 from 300.

BMO analyst Ambrish Srivastava is upbeat about Broadcom’s next planned acquisition, the proposed takeover of Qualcomm (QCOM). On Nov. 13, Qualcomm rejected Broadcom’s initial bid as too low.

“We see Broadcom continuing on its path of translating acquisitions into meaningful accretion to free cash flow and earnings,” Srivastava said in a report. “We are positive on Broadcom’s audacious bid for Qualcomm. We see Broadcom stock worth in the range of $410-450 if the proposed acquisition were to go through.”

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Broadcom’s just-closed acquisition of Brocade will add $1.4 billion in annual revenue and $900 million in earnings before interest, taxes, depreciation and amortization, he said. Broadcom announced its $5.9 billion purchase of Brocade in November 2016.

Broadcom’s acquisition of Brocade removes an uncertainty hanging over the company as it pursues Qualcomm, RBC analyst Amit Daryanani said in a report.

Broadcom is likely to initiate a proxy battle to acquire Qualcomm, but there is still room for the two companies to negotiate a deal, Daryanani said. Broadcom offered to pay $70 in cash and stock for each share of Qualcomm.

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Broadcom shares climbed 1.1% to close at 274.88 on the stock market today. Qualcomm lost 0.4% to finish at 66.47.


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