After reporting quarterly earnings, Broadcom (NASDAQ: AVGO) is trading at a new high for the year. The company easily beat expectations.
Broadcom earned $464 million in Q2 as gross margin improved to 47.2 percent, up from 29.5%. Revenue was up across the board.
Wired infrastructure, wireless communications, enterprise storage, and industrial/other all rose. Wired infrastructure grew the slowest, up 2%, but accounted for $2.11 billion of the revenue.
AVGO forecasts a strong Q3, helped by healthy end markets.
Revenue could reach up to $4.5 billion, while gross margin is in the range of 62-64%. The prospects keep getting better. The company’s customers are expanding their business. On its conference call, AVGO expects the storage unit growing at elevated level. But while management is cautious for Q4, bookings are healthy for the upcoming quarter.
AVGO stock trades ex-dividend (the dividend is 1.02 / share, yielding 1.75%) on June 15.
Risks
AVGO is cautious with its longer-term forecast, due to the uncertainties of DRAM availability. On the conference call, the company said:
"Today, I guess all this big all this increased prices in memory whether its DRAM flash is not hard drives as part of the DRAM and flash is leading to careful spending by enterprises and operators and cloud guys and datacenter. They're all been very careful. So suddenly you have demand that is there, that is needed but people are not spending."
At a 16x forward P/E, Broadcom has value for investors who want exposure in the semiconductor market.
