Broadcom Posts In-Line Second Quarter Earnings On Solid Software Sales

Broadcom Posts In-Line Second Quarter Earnings On Solid Software Sales
June 8, 2020

 

The semiconductor and software technology firm Broadcom Inc (Nasdaq: AVGO) reported fiscal 2020 second-quarter results in-line with Wall Street estimates. However, the median value of the revenue range outlook for the third quarter was slightly below the Wall Street estimates. Still, the stock of Broadcom gained 2.65% or $8.19 to close at $317.08. In the past year, shares of Broadcom have appreciated by 16%.

The San Jose, California-based company reported second-quarter revenues of $5.742 billion, an increase from $5.517 billion in the similar period last year. For the quarter ended May 3rd, 2020, the company posted 2Q 2020 net income of $488 million, or $1.17 per share, compared with $691 million, or $1.64 a share, in the prior-year period. Excluding charges, net income for 2Q 2020 fell slightly from $2.323 billion, or $5.14 per share, from $2.334 billion, or $5.21 a share, in 2Q 2019.

Analysts polled by FactSet had anticipated earnings of $5.14 per share on revenues of $5.69 billion. Back in March, Broadcom withdrew its outlook for fiscal 2020, while forecasting 2Q 2020 revenue of between $5.55 billion and $5.85 billion.

Hock Tan, Broadcom president and CEO, said, “Second-quarter results were in line with our expectations, and saw limited impact from the effects of COVID-19.”

Segment-wise,

  • Semiconductor solutions (chip) posted sales of $4.027 billion, down 2% on a y-o-y basis.
  • Infrastructure software revenues grew 21% y-o-y to $1.715 billion.

Analysts had anticipated a 2.5% decrease in semiconductor chip sales to $3.99 billion and a 21% increase in infrastructure software revenues to $1.71 billion. Tan stated that demand for semiconductor chips has been rising in the third quarter.

At the end of second-quarter, Broadcom’s cash and cash equivalents stood at $9.207 billion, up from $6.444 billion at the end of the earlier quarter.

Looking forward, Broadcom anticipates 3Q 2020 revenues in the range of $5.60 billion to $5.90 billion. The consensus estimate is $5.70 billion. Broadcom anticipates weakness in the wireless chip sales to continue. In the recent quarter, wireless chip sales declined 14% on a q-o-q basis.

Regarding 3Q20 outlook, Tan said, “Looking ahead, our third-quarter guidance for semiconductors reflects a surge in demand from cloud, telecom and enterprise customers, offset by supply-chain constraints and an expected substantial reset in wireless.”

The in-line quarterly results and unimpressive Q3 outlook is expected to keep the stock range-bound with slight bearish bias in the week ahead.

Technically, the stock is facing resistance at 315 levels. The stochastic oscillator also indicates an overbought scenario. Therefore, we are anticipating the stock to begin a downtrend in the short-term.

avg - technical analysis - 8th June 2020

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Janine

Janine

Janine is our editor for related stock market news. Andrew and Janine will be focusing on providing the latest trends and where the next hit could be


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