Management of Avago Technologies Extremely Positive On Broadcom Corp. Synergies: Merrill Lynch
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Management of Avago seemed highly confident on Broadcom
On Monday in San Francisco, Bank of America Corp’s Merrill Lynch held an investor meeting along with Tony Maslowski and International Relation Head Ashish Saran of Avago Technologies Ltd. The reason for the meeting was to discourse the recent acquisition by Avago of Broadcom Corporation. The sell side firm points out all the main points of the conversation in a research report issued on Wednesday, whereas reaffirming buy rating on the stock of Avago with a price target of $180
Merrill Lynch noticed that the overall management impressions looked very optimistic about the Broadcom acquisition. The management is highly confidence with a robust plan to attain the synergies targeted by the company. The management gets an opportunity for additional accretion by closing down the projects not performing up to the mark.
The stock of Avago has been unstable as the shareholders digest the numerous stocks, restricted stock component, cash of the deal announced, but the company thinks this is just a short term problem. Avago Technologies stock continues to be a top pick at Bank of America’s Merrill Lynch, and the company even becomes more confident on its bullish viewpoint.
The sell side firm has high poise in the abilities of the company to come across the $750 million target in cost synergies in the starting eighteen months, depending on its previous acquisition with LSI Corporation. With this acquisition the company was successfully able to reduce $200 million in its total costs that was almost 22% of the LSI OPEX, in spite of negligible 15% to 20% overlay in end markets. With Broadcom Corporation, $750 million is roughly 40% of its 2015 projected opex, but the end market overlay looks almost 65%, which is quite possible.
Vivek Arya, an analyst at Merrill Lynch commented, “The acquired Wi-Fi connectivity business is highly exposed to Apple and Samsung (~65-70% of sales) and there is always some risk of a design out from flagship phones.” However, the firm clarified the significance of the Wi-Fi chip, and the extent of effort used by consumers in design and software, which establishes the design sticky on various product cycles.
According to the poll conducted by Bloomberg, out of analysts covering the stock of the company 18 gave it a Buy, 1 suggests a Hold and only 1 gave a Sell rating to the stock. The twelve month consensus stock price objective is $168.61, reflecting 17.5% of upside potential compared to current stock price.
