Broadcom is involved in all things broadband

Posted Jun 8th 2009 3:40PM by Joseph Lazzaro
Filed under: Broadcom Corp'A' (BRCM), Stocks to Buy

The U.S. and global recessions have merely slowed, not eliminated, the expansion of mobile technology use, and that means it's a good time to scoop up some shares of Broadcom (NYSE: BRCM).

In general, analysts see a difficult F2009 for integrated circuit / communications semiconductor provider Broadcom, with revenue falling 10-15 percent, after an impressive 23% gain in F2008.

Still, the long-term fundamentals for BRCM warrant a Buy, for investors who can tolerate moderate risk. These include: design wins for digital TV, Bluetooth, Wireless LAN, and other mobile handset products. The above, and other business lines, should drive market share gains for BRCM, as consumer demand recovers, particularly in the Asia-Pacific region. The First Call F2009/F2010 EPS estimates for BRCM are 69 cents to $1.04.

The risks include a slower-than-expected ramp-up in orders for handset chips, and a related delay in the recovery of the U.S./global economies.

Stock Analysis: Broadcom is a moderate-risk stock. Consider buying a 25% position in BRCM now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your BRCM position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $11.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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