Broadcom Poised For More Growth; Decision On $61 Billion Bid For Cloud Play Looms

The company is trying to win approval for its VMware deal.

Broadcom Poised For More Growth; Decision On $61 Billion Bid For Cloud Play Looms

(AVGO), is nearing a buying point as earnings are just a few weeks away. The stock is rated 99 on the Composite Rating.

The leader in fabless chips is ranked second, and the group occupies 41st position among IBD's industry groups.

Sales of $8.9 Billion for the first quarter ending Jan. 29 increased by 16%, while earnings per share at $10.33 increased by 23%. Dividends of $4.60 were paid to shareholders who had registered their shares as of March 22, 2019. Sales growth over the last seven quarters has been between 15% and 25 percent, while earnings growth has been between 22 and 40 percent.

Broadcom anticipates $8.7 billion in sales for the quarter ending April 30. This is an increase of 7% over the same period last year. FactSet's analysts polled have similar estimates to the company, with a view of earnings per share at $10.14. The fiscal second-quarter results are due on June 1.

Growth Stock Shows Bullish Patterns

The stock is forming an even base with a buy point of 648.60.

IBD MarketSmith’s weekly chart shows that the current base is part of a 65-week cup base, with an entry at 677.76. The stock did not break out, but it found support at the 50-day moving average.

The weekly chart shows areas that are tighter than three weeks, indicating that a stock is building up support before continuing to move.

The San Jose-based company produces chips and software for data centres, broadband, wireless and storage as well as enterprise software. Broadcom products are used by customers for automation, monitoring devices, and data security infrastructure.

Broadcom has agreed to buy cloud computing company VMware (VMW), for $61 billion, in cash and shares. However, the European Union's antitrust regulators must approve the deal.

VMware, a cloud computing service provider, has transformed the server-based computer earlier.

Broadcom will be able to expand its software infrastructure portfolio. The deal could limit competition in certain hardware segments, including fiber channel adapters for data transfer and storage devices that support VMware.

The deadline for making a decision was extended by regulators on Friday to the 26th of June.

The fact that mutual funds own 53% total shares of growth stocks is a bullish sign. A further bullish sign comes from the fact that funds have bought more of the chip leader in the last eight quarters. Interest from fund managers has earned the stock an Accumulation/Distribution Rating of B+.

Fidelity Contafund (FCNTX) is a mutual fund that owns the growth stock. The SPDR S&P ETF Trust (SPY), and the iShares S&P Core 500 ETF (IVV) are exchange traded funds that own the growth stock.