By Senad Karaahmetovic
Benchmark analysts initiated research coverage on Broadcom (NASDAQ:AVGO) with a Buy rating and a $770 per share price target.
The chipmaker is well-positioned to "capitalize on the attractive growth of connectivity and paired with solid infrastructure software," the analysts wrote in the initiation note.
They especially praised the company's M&A strategy.
"Through its strategic process of aggressive acquisitions and prudent divestitures, Broadcom has not only developed a very diverse product set, end markets, and customer base, but it has done so in a way that creates expense and sales synergies, delivers high margins, and is levered to many of the industry’s fastest growing markets, focused primarily on wireline and wireless connectivity, data center, storage, and infrastructure software," they said.
Overall, Benchmark sees "discounted valuation," partially due to regulatory challenges tied to the $61 billion acquisition of VMware (NYSE:VMW).
"We expect the transaction to close, with Broadcom's VMware business growing to become a strong 4th web services competitor to Amazon's AWS, Microsoft's Azure, and Google's Cloud Services," added the analysts.