Broadcom Inc. (NASDAQ: AVGO) announced its fiscal Q1 2022 earnings report on Thursday, March 3, 2022, in which the company reported record revenue topping analysts' estimates.
What to look for: The company reported record Q1 2022 was driven by solid enterprise demand and continued investment in next-gen tech by service providers and hyper-scale. In addition, CEO Hock Tan stated that Q2 2022 outlook suggests an acceleration in YoY growth.
Earnings: Stockearning’s Estimated EPS for Q1 2022 was pegged at $8.23 per share, but the company reported a non-GAAP net income of $3.74 billion or $8.39 per share. In the fourth quarter, the company produced an earnings surprise of 3.55% with an EPS of $7.01. Historical EPS shows that the company has, in the past 12 quarters, topped estimates 33 times (91%) and missed three times (8%).
Revenue: Revenue was up 16% YoY to $7.7 billion, topping estimates of $7.6 billion. The semiconductor solution segment had revenue of $5.87 billion, with the infrastructure software segment hitting revenue of $1.83 billion. For fiscal Q2 2022 ending May 1, 2022, the company is predicting revenue of $7.9 billion versus analyst estimates of $7.4 billion.
Stock movement: AVGO shares have gained 0.4% since the company released its last earnings release. Interestingly, following the earnings release, the company’s shares have been UP 35 times in the past 48 quarters. So, the historical price reaction suggests a 72% probability of the share price going DOWN following the earnings release. According to the Stockearning algorithm, the predicted volatility on the first day is +/-4%, while the predicted volatility on the seventh day is +/-5%.
What analysts are saying: Piper Sandler analyst Harsh Kumar believes AVGO is in a “great position to beat and raise” when it releases earnings. Kumar is optimistic about the earnings release and guidance for several reasons. Considering the increase in hyper-scale and data center expenditure, Kumar believes Broadcom's networking division has re-accelerated and views Apple's better-than-seasonal holiday quarter as a positive for Broadcom's wireless unit. Amid market weakness, Kumar further expects the company to use its newly disclosed $10 billion repurchase plan. He keeps his Buy rating on the stock and sets a price objective of $750.
Argus analyst Jim Kelleher raised his price target on Broadcom from $620 to $715 and maintained a Buy rating on the shares. The analyst points to the firm's Q4 earnings beat, which saw revenue increase by double digits thanks to a high-teens percentage change in semiconductor sales and higher-single-digit gain in infrastructure program revenues. Despite a healthy growth outlook, Kelleher writes in a research note that Broadcom trades at a discount to rivals on various price-based measures and is also appealing on discount-free cash flow valuation.
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