Avago Technologies (AVGO) has been performing terrifically in 2014 thanks to the success of Apple’s (AAPL) iPhone 6. Despite the extraordinary performance, analysts are still hopeful to see more upside as the stock has been subjected to multiple upgrades in the past few weeks. Looking at the positive sentiments and the company’s prospects, I think Avago Technologies is a buy at present valuation.
The company shared terrific quarterly results as well. Avago Technologies reported first quarter adjusted EPS of $1.99 on Wednesday, contrasted with $0.89 in the earlier year. Analysts expected EPS of $1.68.Revenue was $1.61 billion, up 25% successively and 118% on a year-over-year premise. Analysts were displaying for a revenue figure of $1.55 billion. Gross margin expanded to 58% as contrasted with 51% in the same quarter a year ago.
Looking ahead
As indicated by UBS Investment Research, Avago's key clients incorporate cell phone pioneers Samsung (SSNLF) and Apple, both of which buy Avago's RF chips. Indeed, Apple and Samsung likely record for two-third of Avago's revenue together, and this is uplifting news for investors.
Avago supplied an aggregate of three chips for Samsung's most recent lead gadget, the Galaxy S5. Also, since Samsung builds its progressive gadgets with respect to its lead telephones, it is likely that Avago has additionally picked up a spot in the Note 4 phablet (Avago has been a supplier for prior Galaxy Note variants). Phablet deals are required to develop at a colossal pace later on. Statista estimates that 350 million phablets will be sent before the end of 2016, as contrasted with just 143 million in 2013.
Considering that the Galaxy Note is among the most famous phablets, Avago ought to profit as it supplies chips for the gadget. Then again, Avago ought to likewise profit from the iPhone 6, for which it supplies radio recurrence segments and has supposedly picked up content. The iPhone 6 has got off to a strong begin, with Apple breaking the 10 million deals boundary in the first weekend. Looking ahead, the prospects for Apple’s iPhone look solid and this is a plus for Avago investors.
Likewise, Avago's ASIC and fiber optics business are additionally anticipated that will move forward. The repressed interest for 40g chips is relied upon to drive its fiber optics business, while ASIC is required to see supported request because of big business switching and routing. Presently, the organization has been arriving configuration wins for these items because of its mechanical development.
In addition, Avago has likewise made a route into the stockpiling market by securing LSI. This is again a brilliant move by the organization, as development in server and capacity integration will prompt development popular in the glimmer stockpiling market. As of now, Avago's OEM clients are utilizing its 12g SAAs answers for dispatch new items, and the organization anticipates that the pattern will proceed later on.
Conclusion
Thus, looking at the factors mentioned above, I think investors should add Avago Technologies to their portfolios despite its seemingly rich valuations.
