By Wallace Witkowski, MarketWatch
Broadcom Inc. shares ticked higher in the extended session Thursday after the chip maker’s outlook for 2020 topped Wall Street estimates.
Broadcom /zigman2/quotes/200646538/composite AVGO +0.57% said in its fiscal fourth-quarter earnings report Thursday afternoon that it expects fiscal 2020 revenue of $24.5 billion to $25.5 billion, while analysts surveyed by FactSet had forecast on revenue of $23.9 billion. For fiscal 2019, Broadcom reported revenue of $22.6 billion, up from $20.85 billion in fiscal 2018.
That outlook signals a growing optimism that 2020 will be a better year for the chip sector than 2019, which suffered in comparison to 2018 when chip sales reached record levels globally.
“When we look at our semiconductor segment today we are increasingly thinking about it as a core and semiconductor business that consists of networking broadband and storage connectivity products focused on enterprise service providers and cloud infrastructure,” said Hock Tan, Broadcom president and chief executive, on the conference call.
“Here we get a lot of strategic synergies and scale across our end markets with our customers and with our core silicon technology,” Tan said.
Back in August, Broadcom announced its $10.7 billion acquisition of Symantec’s enterprise security business, which closed last month, resulting the remaining company NortonLifeLock Inc. /zigman2/quotes/200957356/composite NLOK +0.90%
Tan said that about $7 billion of 2020’s revenue is expected to come from the company’s relatively new software segment.
“Symantec is expected to contribute approximately $1.8 billion including the effects of purchase accounting while CA and Brocade are expected to be relatively flat to up slightly,” said Tom Krause, Broadcom’s financial chief, on the call.
The company reported fiscal fourth-quarter net income of $818 million, or $2.06 a share, compared with $1.12 billion, or $2.71 a share, in the year-ago period. Adjusted earnings were $5.39 a share. Revenue rose to $5.78 billion from $5.44 billion in the year-ago quarter. Analysts had forecast earnings of $5.39 a share on revenue of $5.77 billion.
Broadcom shares rose 1% in the extended session immediately following the results, following a 2.5% rise in the regular session to close at $327.80. At Thursday’s close, Broadcom’s stock was up nearly 29% on the year, compared with a 26% advance on the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.39% , and a 56% rally in the PHLX Semiconductor Index /zigman2/quotes/210598361/realtime SOX +0.67% .
Of the 32 analysts who cover Broadcom, 20 have buy or overweight ratings, while 12 have hold ratings, along with an average price target of $329.63, according to FactSet data.