Fly News Breaks for December 23, 2019
AVGO, SWKS, QRVO
Dec 23, 2019 | 08:37 EDT
Morgan Stanley analyst Craig Hettenbach noted that The Wall Street Journal reported last week that Broadcom (AVGO) is considering selling its RF business in a deal that could be valued at $10B, which he thinks "seems low" relative to Skyworks (SWKS) and Qorvo (QRVO). He would use any volatility related to news of potential strategic actions to buy the stock, highlighting that he doesn't believes the shares are given credit for the fact that Broadcom has expanded gross margins by nearly 1000 basis points,and operating margin by 700 basis points, over the last three years. Hettebach, who estimates that a sale of RF could be dilutive to EPS by low single digits, but also thinks such a sale could free up added capital to pursue accretive software acquisitions, keeps an Overweight rating and $367 price target on Broadcome shares.
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