Avago has a strong balance sheet. The company is debt-free and has cash and equivalents of nearly $650 million.
In addition, the company reported a year-over-year increase of 44% and 11.4% in earnings and revenue, respectively, outperforming the growth in the S&P 500 index during the same period. Due to all these factors, the company is confident of maintaining sufficient liquidity to kick-start a quarterly dividend program.
iPhone 6 Can Provide a Massive Boost
Pre-orders for the Samsung Galaxy S5s are soaring as it has already surpassed its predecessor, the Galaxy S4, by a whopping 130%. The phone is expected to hit the market on April 11, and whether it will sustain this surge is yet to be seen. However, the lack of significant new features may not be enough to satisfy the tech enthusiasts who have been waiting for the device for quite some time now.
This sets up Apple's iPhone 6 for a grand slam start. People all around the world eagerly wait for Samsung's and Apple's flagship devices every year and given that Samsung has only marginally improved the Galaxy S5 as compared to the S4, the iPhone 6 can be off to a great start.
Buying Avago before the launch of the iPhone 6 can prove to be a lucrative investment. Tech enthusiasts are hoping that Apple will add many new features to the iPhone 6 and if rumors are to be believed, Apple is on track to fulfill these expectations. Apple is planning to launch devices with bigger screens as it is targeting markets where larger screen sizes are in vogue, and the latest speculation suggests that Apple is preparing the iPhone 6 with a 4.7-inch screen this year. In addition, both Canacorrd and Forbes are confident that the iPhone 6 will come with a durable sapphire display with a bezel-free design. This will make the device stronger and thinner. Apart from this, rumors suggest that Apple will add many new features like a better processor, improved camera, upgraded display technology, etc.
Also, Apple is aggressively looking to improve its sales, and CEO Tim Cook has announced that 50 more carriers will get the iPhone in the current quarter, globally, according to the Wall Street Journal. So, these initiatives should drive up the iPhone's sales and given that Avago has gained strong dollar content in the iPhone, it should benefit from it.
Avago Technologies looks set to benefit from the growing LTE and smartphone market. Even after the impressive uptick in 2014, Avago is still trading at 30 times trailing earnings. The company's cheap valuation, as compared to the other promising tech companies, along with the impending initiation of the dividend program, makes it a great buy.