Chipmaker Broadcom Inc (Nasdaq: AVGO) reported better-than-anticipated fiscal 2021 third-quarter earnings and revenues. The tech firm also issued a highly optimistic fourth-quarter outlook based on continuing robust demand for chips that serve the 5G mobile market. Following the solid results and impressive outlook, the stock ended last week’s trading at $497.68, an increase of $5.78 or 1.18% from the prior close.
The San Jose, California-based infrastructure software solutions provider reported third-quarter revenues of $6.778 billion, an increase of 16.50% from $5.821 billion in the similar period last year.
For the quarter ended August 1st, 2021, the company posted 3Q 2021 net income of $1.802 billion, or $4.20 per share, compared with $614 million, or $1.45 a share in the quarter ended August 2nd, 2020.
Excluding amortization of acquisition-related intangible assets, stock-based compensation expense, restructuring, impairment and disposal charges, and acquisition-related costs, among others, the Q3 2021 non-GAAP net income was $3.124 billion or $6.96 per share, compared with $2.435 billion or $5.40 a share in Q3 2020.
Analysts surveyed by FactSet had anticipated the company to report earnings of $6.88 per share on revenues of $6.76 billion for the reported period.
Commenting on the quarterly results, Hock Tan, President and CEO of Broadcom, said, “Broadcom delivered record revenues in the third quarter reflecting our product and technology leadership across multiple secular growth markets in cloud, 5G infrastructure, broadband, and wireless. We are projecting the momentum to continue in the fourth quarter.”
Segment-wise,
- Semiconductor solutions revenues increased 19% y-o-y to $5.021 billion.
- Infrastructure software revenues were $1.757 billion, an increase of 10% on a y-o-y basis.
The company ended the third quarter with cash and cash equivalents of $11.105 billion, compared with $9.518 billion at the end of the previous quarter. During the third quarter, Broadcom generated cash from operations of $3.541 billion, while spending $115 million on capital expenditures.
Looking forward, the company expects fourth-quarter revenues to be roughly $7.35 billion. Likewise, Broadcom anticipates fourth-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of about 61% of forecast revenue.
The company’s Board has approved a quarterly cash dividend of $3.60 per share, payable on September 22nd, 2021.
Furthermore, Broadcom’s Board has also approved a quarterly cash dividend on its 8% Mandatory Convertible Preferred Stock, Series A, of $20 per share, payable on September 15th, 2021.
Notably, a few days before the company published its quarterly earnings, JPMorgan analyst Harlan Sur reiterated the overweight rating for the stock, pointing to robust growth rates in the cloud and impressive market share in switch and router markets. Sur has also given a target price of $585 for the stock of Broadcom, implying a likely upside of about 20% from Friday’s close.
The quarterly earnings beat and impressive Q4 revenue outlook are expected to keep the stock of Broadcom range-bound with a slight bias in the short-term.
Technically, the stock is rising after consolidating at 450 levels. The stock is trading above its 50-day moving average, while the stochastic oscillator is in the bullish zone. Therefore, we are anticipating the stock to remain in an uptrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
