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Apple ( AAPL ) supplier Broadcom ( AVGO ) likely gained another 20% in iPhone 7 content on top of continued increases in Samsung Galaxy smartphones, giving investors “multiple ways to win,” Credit Suisse analyst John Pitzer said Thursday. Broadcom is slated to report Q2 earnings on June 2 after the market close. Pitzer expects in-line Q2 sales, but he sees a “significant EPS cushion” on cost-cutting and synergies related to Broadcom’s merger with the former Avago. In February, Avago completed its $37 billion acquisition of Broadcom, with the merged company taking the Broadcom name, in a deal the companies said gives the combined entity an enterprise value of $77 billion. For Q2, the consensus of 30 analysts polled by Thomson Reuters expects Broadcom to report $3.55 billion in sales and $2.38 earnings per share minus items, up 116% and 12%, respectively, vs. the year-earlier quarter. On Wednesday, fellow Apple supplier Analog Devices ( ADI ) reported year-over-year sales declines for fiscal Q2 and guided to another 5% sales dip for its July quarter. Pitzer expects Broadcom’s July-quarter sales view to likewise disappoint. But, like Analog Devices, Broadcom expects to grow its iPhone 7 content . Three months ago, CEO Hock Tan said Broadcom’s radio-frequency (RF) content in smartphones has increased by 20% every year, and that this year will be no exception. Tan’s view came before Apple reported its first-ever decline in iPhone sales, occurring in the March quarter. Pitzer sees Broadcom guiding to $3.39 billion in fiscal Q3 sales, below the consensus view for $3.72 billion. But he boosted his EPS-minus-items view to $2.64 from $2.51, matching the consensus model. For 2016 and 2017, he expects $11.16 and $12.86 EPS ex items, respectively. Wireless sales — including sales to Apple — have declined to 25% of total revenue from 50%. Less volatile data center sales now account for half of Broadcom’s revenue, he wrote. “Broadcom’s portfolio of businesses is significantly dampening the impact of any single headwind,” he wrote in a research report. “Broadcom can weather ‘isolated storms’ while maintaining the integrity of EPS upside.” Pitzer reiterated an outperform rating and a 180 price target on Broadcom stock. Broadcom shares were down 1%, near 142, in afternoon trading on the stock market today . RF rivals Skyworks Solutions ( SWKS ) and Qorvo ( QRVO ) were down a respective 1.4% and 0.4%. The trio fell amid fresh reports examining the effect slowing smartphone sales will have on chipmakers. Scalper1 News
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