Broadcom (AVGO) is approaching a buy point just as the company’s earnings are a couple of weeks away. The growth stock has a perfect 99 Composite Rating.
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The chip leader ranks second in the fabless chip group which holds 41st place among IBD’s 197 industry groups.
For the first quarter ended Jan. 29, sales of $8.9 billion grew 16% while earnings per share of $10.33 were up 23%. A dividend of $4.60 per share was payable to shareholders on record as of March 22. More significantly, sales growth has ranged between 15% and 25% over the past seven quarters while growth in earnings has been between 23% and 40%.
For the quarter ended April 30, Broadcom expects sales of $8.7 billion, up 7% from the same quarter last year. Analysts polled by FactSet have estimates that are in line with the company’s, with views for earnings per share of $10.14. Fiscal second-quarter earnings are due June 1.
Growth Stock Shows Bullish Patterns
The stock is forming a flat base with a 648.60 buy point.
The current base formed within a 65-week long cup base with a 677.76 entry, seen on IBD MarketSmith’s weekly chart. Though that breakout failed, the stock found support along the 50-day moving average.
The weekly chart also shows three-weeks-tight areas, which are signs of a stock building support before continuing its move.
The San Jose, Calif., company makes chips and software for data centers, broadband, wireless, storage, networking and enterprise software. Customers use Broadcom’s products for automation, monitoring devices and data security infrastructure.
Broadcom is in the process of buying cloud computing firm VMware (VMW) for $61 billion in cash and stock but needs clearance from antitrust regulators in the European Union.
VMware is a cloud service provider that transformed server-based computing earlier.
The purchase will expand Broadcom’s software infrastructure portfolio. But the deal may restrict competition for certain hardware segments that work with VMware, such as fiber channel bus adapters that enable data transfer and storage adapters that allow access to different storage technologies.
On Friday, regulators extended the deadline for a decision to June 26.
Mutual funds own 53% of total shares of the growth stock, which is bullish. Another bullish sign is that more funds have been buying the chip leader over the past eight quarters. Interest from fund managers has earned the stock an Accumulation/Distribution Rating of B+.
Mutual funds owning the stock include Fidelity Contrafund (FCNTX). Exchange traded funds that hold the growth stock include SPDR S&P 500 ETF Trust (SPY) and the iShares Core S&P 500 ETF (IVV).
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