(By Balaseshan) RBC Capital Markets analyst Doug Freedman upgraded rating of Broadcom Corp. (NASDAQ:BRCM) to "Outperform" from "Sector Perform" and increased price target to $46 from $38.
The brokerage raised 2012 EPS estimate for the provider of semiconductor services for wired and wireless communications to $2.96 from $2.92 and its 2013 estimate to $3.17 from $3.00.
Freedman said product pipeline is ripe with potential content and unit increases ahead, as the rate of operating expenses growth is set to decelerate, driving operating margins higher. He believes that BRCM's ability to drive recurring business and steady design wins stems from customized software.
As an example, the company remains well-positioned to hold onto slots at Apple Inc. (NASDAQ:AAPL) as the analyst expects Apple could grow towards 15% of total revenues in 2012 from 13% in 2011. In addition, he believes BRCM could be in a position to win back market-share from Qualcomm Inc.'s (NASADQ:QCOM) 8960 platform.
In 2013-2014, BRCM appears to have integration opportunities ahead outside of upcoming NFC, including power amplifiers and RF content, the analyst noted. The company is benefiting from strength in 3G basebands (Samsung and China exposure), Combos (expanding customer base), and set-top-boxes (particularly outside North America).
In addition, trends in the Infrastructure & Networking segment appear healthy given recent concerns in the Communications end-market, Freedman noted. Operating expenses controls are becoming transparent as BRCM is beginning to slow the rate of operating expenses growth, which is generally atypical for the company.
Consequently, revenues in Q3 are slated to outpace spending. Freedman forecasts the next leg up in leverage from incremental growth in 40nm Handset platform solutions that should ramp in 2013.
BRCM is trading up 2.13% at $36.86 on Tuesday.