Avago (AVGO) PT Lifted to $185 at UBS

UBS analyst, Stephen Chin, is confident Avago Technologies (NASDAQ: AVGO) RF filter sales can grow at a 20% CAGR for the next few years given higher content from further penetration of 4G LTE-Advanced features in smartphones. With smartphone RF content averaging $6 at the high end, we believe content can expand to $8-10 over the next several years. Other positives from his perspective include limited RF filter market oversupply risks for the foreseeable future, earnings accretion of 30% from the Broadcom acquisition which could close within the next several months, and enterprise storage sales continue to outperform market expectations.

Avago noted that its acquisition of Broadcom is on track to close early in C1Q16 and integrated financials could come during its Apr '16 quarter. Due diligence and most regulatory approvals are largely completed, and cost synergies should meet or exceed the $750M target with the majority coming from opex.

Enterprise storage sales grew 9% q/q and continues to see top line expansion from product ramps and modest share gains in server storage, and despite end market and OEM trends that suggest a contracting market. HDD storage appears stable as well.

The analyst raised his price target to $185 from $170 based on 13x CY17 post-BRCM merger non-GAAP EPS of $14.25. No change to Buy rating.

For an analyst ratings summary and ratings history on Avago Technologies click here. For more ratings news on Avago Technologies click here.

Shares of Avago Technologies closed at $132.21 yesterday.

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