Cowen is adding Broadcom (NASDAQ:BRCM) to the Focus List as they believe the worst of the inventory correction is behind us, and the company is well positioned for a strong recovery starting in Q406 and continuing into 2007.
Firm's checks indicate the company will likely see strength in Q4 from several key markets including Bluetooth, cellular baseband, 802.11n as well as 802.11g WLAN, LCD TV, Server I/O chipsets, GigE switching, and multimedia. As such, firm is raising their Q4 revenue estimates from $935M (4% Q/Q growth), to $948M (5% Q/Q growth), and above consensus of $945M. They are raising 2007 EPS estimate from $1.40 to $1.45, above consensus of $1.42. They continue to view Broadcom as having one of the best secular growth stories in their coverage universe, given the company's multiple product cycles including 802.11n, GigE switching, Bluetooth, LCD TV, and 3G cellular. Firm expects the shares to outperform the market by 50% over the next 12 months.
The company has completed its independent internal review of historical options granting programs and has submitted its proposed restatement for review by the SEC; with the recent retirement of CFO Bill Ruehle, firm believes the company is now positioned to move beyond the options issue; a significant positive, in their view.
Notablecalls: BRCM will see some interest on this note, it could move as much as full point.