Vmware Is Up By 20%, Here Is Why

Key Insights

  • Vmware stock rallies as Broadcom is reportedly working on a deal to purchase the company. 
  • The deal is reportedly valued at $50 billion. 
  • Vmware stock has already jumped by 20% at the start of the trading session, which limits the potential upside. 

Broadcom Could Be Ready To Buy Vmware

Shares of software virtualization company Vmware gained strong upside momentum after reports indicated that Broadcom was willing to buy the company. According to the reports, negotiations were still ongoing and the deal was not imminent.

Vmware stock peaked back in 2019 near the $207 level and was trading below the $100 level before the reports were released. It should be noted that the stock managed to recover to the $170 level after the coronavirus-related sell-off in 2020 but lost momentum and has been under pressure for months.

As a result, the stock declined to attractive valuation levels. Analysts expect that Vmware will report earnings of $7.02 per share in the current fiscal year and earnings of $7.78 per share in the next fiscal year, so the stock was trading at just 12 forward P/E before Broadcom’s desire to buy Vmware was made public.

What’s Next For Vmware Stock?

According to Financial Times, the deal could be valued at $50 billion. Vmware stock has already moved closer to this level, although the stock will continue to trade at a discount to the potential value of the deal.

Analyst estimates for Vmware have been recently moving lower, but the stock was already trading at attractive valuation levels, which has likely served as one of the key catalysts behind Broadcom’s interest in the deal.

Vmware stock is already up by 20% at the start of the trading session, so its potential upside would be limited as the reported valuation implied a 25% premium to Vmware’s previous closing price.

At the same time, it remains to be seen whether Vmware shareholders would be ready for a deal with a modest premium after the stock has been declining for months, so this story could get a few more twists along the way.

To keep up with the latest earnings updates, visit our earnings calendar.

Should You Buy Broadcom Ahead of Earnings?

Chipmaker Broadcom is expected to report higher earnings and revenue in the fiscal first quarter, which could help the stock recover its recent losses.

With the global shortage of chips, the price hike and the continued strength in markets such as electric vehicles and mobile devices, the semiconductor industry has gained strength.

The semiconductor manufacturer is expected to report earnings per share of $6.59 in the fiscal first quarter, which represents year-over-year growth of over 14% from $5.78 per share seen in the same period a year ago.

The San Jose, California-based semiconductor manufacturer would post revenue growth of nearly 14% to $7.6 billion from $6.6 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

At the time of writing, Broadcom stock traded 2.88% higher at $586.68 on Wednesday. The stock fell nearly 12% so far this year after surging more than 51% in 2021.

Analyst Comments

Broadcom (AVGO) is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec,” noted Joseph Moore, equity analyst at Morgan Stanley.

“While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in an enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

Broadcom Stock Price Forecast

Twenty-three analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $689.18 with a high forecast of $750.00 and a low forecast of $615.00.

The average price target represents an 18.92% change from the last price of $579.51. Of those 23 analysts, 20 rated “Buy”, three rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $723 with a high of $937 under a bull scenario and $577 under the worst-case scenario. The investment bank gave an “Overweight” rating on the semiconductor manufacturer’s stock.

Several analysts have also updated their stock outlook. Barclays raised the target price to $700 from $650. Piper Sandler lifted the price objective to $750 from $680. Baird upped the price target to $690 from $550.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator gives a strong buying opportunity.

Check out FX Empire’s earnings calendar

Wall Street Week Ahead Earnings: Zoom, Salesforce, Domino’s, Dollar Tree and Broadcom in Focus

Traders have been rattled by geopolitical tensions over the Russia-Ukraine crisis, which has caused the global stock market to suffer. The S&P 500 plunged into correction territory. If tensions continue for long, analysts fear that it will be harder for the U.S. Federal Reserve to raise rates after next month’s hike. Due to this, investors sought safe-haven assets and U.S. Treasury yields fell as tensions between Ukraine and Russia increased. In addition, investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks amid surging inflation.

Earnings Calendar For The Week Of February 28

Monday (February 28)

IN THE SPOTLIGHT: ZOOM

The San Jose, California-based communications technology company Zoom is expected to report its fiscal fourth-quarter earnings of $0.67 per share, which represents a year-over-year decline of nearly 24% from $0.88 per share seen in the same period a year ago.

The company, which provides video telephony and online chat services through a cloud-based peer-to-peer software platform, would post revenue growth of 19% to $1.05 billion.

“We have seen a reluctance of investors around Zoom given recent performance of WFH winners. Look to FY23 guide as opportunity to reset Street expectations, giving investors a cleaner path to getting involved. Remain OW on early days company at upselling large installed base with ancillary products,” noted Meta Marshall, equity analyst at Morgan Stanley.

Zoom has established its position as the leader in video conferencing, now a growth market. Company has meaningful competitive moat built on more than just architecture. Position within customers makes an attractive opportunity to expand into broader UC market. Early wins encouraging. Opportunities to expand platform remain. Manageable churn post-COVID as move to hybrid work setups continues.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 28

TICKER COMPANY EPS FORECAST
AMBA Ambarella $-0.04
HPQ HP $1.04
NVAX Novavax $0.36
SBAC SBA Communications $2.62
SDC SmileDirectClub $-0.28
WDAY Workday $-0.19

 

Tuesday (March 1)

IN THE SPOTLIGHT: SALESFORCE.COM, DOMINO’S PIZZA

SALESFORCE.COM: The San Francisco, California-based software company is expected to report its fourth-quarter earnings of $0.75 per share, which represents a year-over-year decline of over 27% from $1.04 per share seen in the same period a year ago.

However, the leading provider of enterprise cloud computing solutions would post revenue growth of nearly 25% to $7.24 billion up from $5.82 billion a year earlier. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

Salesforce.com (CRM) is down 35% since reporting F3Q vs. IGV down 25% due to software selloff, investor fears around demand-pull forward and MuleSoft, and tougher compares in 1HF23. Our survey indicated 88% expect their pipelines to grow with 37% expecting growth of 20%+ in F23. Despite a tough set-up heading into the Q, expectations are low. CRM offers attractive risk-reward as it trades close to trough levels at 5x ’23 rev. vs. comps at 9x (40% discount). Maintain Buy,” noted Brent Thill, equity analyst at Jefferies.

DOMINO’S PIZZA: The world’s largest pizza restaurant by sales is expected to report its fourth-quarter earnings of $4.30 per share, which represents year-over-year growth of about 12% from $3.85 per share seen in the same period a year ago.

The Ann Arbor Michigan-based company has beaten consensus earnings estimates in most of the quarters in the last two years, at least. The largest pizza chain in the world would post revenue growth of 2% to around $1.38 billion from $1.36 billion a year earlier.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 1

TICKER COMPANY EPS FORECAST
AZO AutoZone $16.42
AVID Avid Technology $0.33
BIDU Baidu $1.49
DPZ Domino’s Pizza $4.30
JAZZ Jazz Pharmaceuticals $2.96
JWN Nordstrom $1.05
ROST Ross Stores $0.97
TGT Target $2.85

 

Wednesday (March 2)

IN THE SPOTLIGHT: DOLLAR TREE

The Chesapeake, Virginia-based company Dollar Tree is expected to report earnings of $1.78 per share in the fourth quarter, down over 16% from $2.13 per share seen in the same period a year ago. But the discount variety stores that sells items for $1 or less would post revenue growth of more than 5% to $7.13 billion.

“While supply chain disruptions and associated costs are top of mind given the unexpected magnitude of these costs in 2Q and ongoing impact in 3Q, we believe that Dollar Tree’s price-increase initiative will likely be a focal point for investors. More specifically, we think investors will look to better understand customer receptivity to these price increases, the degree to which these price increases can mitigate the aforementioned supply chain costs, and to what extent the company is utilizing higher price point items to diversify merchandising and sourcing,” noted Randal J. Konik, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 2

TICKER COMPANY EPS FORECAST
ANF Abercrombie & Fitch $1.59
BOX Box Inc. $-0.06
PDCO Patterson Cos. $0.50
SGFY Signify Health $0.02
SPLK Splunk $-1.08
VEEV Veeva Systems $0.59

 

Thursday (March 3)

IN THE SPOTLIGHT: BROADCOM

Chipmaker and software infrastructure supplier Broadcom is expected to report earnings per share of $8.08 in the fiscal first quarter, which represents year-over-year growth of over 22% from $6.61 per share seen in the same period a year ago.

The San Jose, California-based semiconductor manufacturer would post revenue growth of nearly 14% to $7.6 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

Broadcom (AVGO) is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec,” noted Joseph Moore, equity analyst at Morgan Stanley.

“While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 3

TICKER COMPANY EPS FORECAST
BBY Best Buy $2.81
BIG Big Lots $2.19
COST Costco Wholesale $2.54
GPS Gap $-0.12
KR Kroger $0.70
WB Weibo $0.75

 

Friday (March 4)

No major earnings are scheduled for release.

Best ETFs for 2022

Despite the S&P 500 rising, Big Money has been selling more than buying in December. Going to MAPsignals.com, we can scan Big Money ETF Buys and Sells. Recent big selling, indicated by the deep red lines in the chart below, led to choppy markets. But the selling shrank to practically nothing in late December. When selling dries up, it’s a bullish sign.

Source: www.mapsignals.com

Long-term investors should look for ETFs (and their stocks), with great setups.

Remember: ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best ETF opportunities for 2022.

#1 iShares Semiconductor ETF (SOXX)

Semiconductor stocks had a good year overall. Big Money has been buying SOXX in chunks for most of 2021. Considering semiconductors’ widespread use and scarcity, it makes a lot of sense.

Below you can see the Big Money buys for SOXX:

SOXX holds several solid stocks; one example is Broadcom, Inc. (AVGO). Here are Big Money signals for AVGO:

#2 iShares Russell 1000 Growth ETF (IWF)

This ETF is all about growth. IWF holds some of the largest stocks out there – big, well-known names. There were washouts around March and October (red bars), but look closely and you’ll see how big dips have preceded big rises:

One great stock IWF holds is Microsoft Corporation (MSFT). It’s a long-time Big Money favorite with awesome fundamentals. As the multi-year chart below shows, it’s been a monster stock for years:

#3 Vanguard Dividend Appreciation Index Fund ETF Share (VIG)

Dividend stock exposure is part of a diversified portfolio, and VIG is sort of a “best of” ETF of dividend-paying stocks. The companies it contains are huge, household names across many industries. It’s been a solid performer all year:

One of many big winners within VIG is Abbott Laboratories (ABT). It’s an outlier stock that pays a huge dividend:

#4 Invesco NASDAQ Next Gen 100 ETF (QQQJ)

The first three ETFs were from the stronger part of my ranked list. Now we look for bargains by identifying weaker ETFs holding stocks with strong fundamentals. QQQJ fits the bill. It’s been under lots of recent selling pressure. Near-term weakness can be an opportunity:

One winner within this ETF is Fortinet (FTNT). Big Money loves it. The multi-year chart says don’t bet against it:

#5 ARK Next Generation Internet ETF (ARKW)

This pick is from the “bargain bin,” but don’t let that throw you off to its potential in 2022 and beyond. Many ARK funds have been under pressure, ARKW included. While it has fallen significantly, ARKW holds great companies that are a big part of the business world. So, it could be a potential outlier.

One great stock in ARKW is Block Inc Class A (SQ), formerly known as Square. It’s been hit hard lately, but Big Money has shown interest in SQ because of its solid fundamentals. Given the firm’s future focus, I’m a believer that it could thrive (as it has since Big Money dove in):

Here’s a Big Money recap:

  • When Big Money buying pours in, stocks tend to go up
  • Red selling on great quality can be a great opportunity
  • Repeated buying usually means outsized gains

Let’s summarize here:

Graphical user interface, text Description automatically generated

SOXX, IWF, and VIG rank high. QQQJ and ARKW, however, rank lower on our list, due to weaker technicals. That’s why I think these weaker ETFs represent great potential bargains.

The Bottom Line

SOXX, IWF, VIG, QQQJ, and ARKW are my top ETFs for 2022. Sticking with quality funds holding top stocks is a winning recipe long-term.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in SOXX, IWF, VIG, QQQJ, ARKW, AVGO, MSFT, ABT, FTNT, or SQ in managed or personal accounts at the time of publication.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Big Money Loves Broadcom

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Broadcom has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares all year.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the big money signals AVGO has made the last year.

The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com

In 2021, the stock has attracted 16 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

  • 1-month outperformance vs. Technology Select Sector SPDR Fund (+10.6% vs. XLK)

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Broadcom has been growing sales at a double-digit rate. Take a look:

  • 3-year sales growth rate (+10.8%)
  • 3-year earnings growth rate (+174.2%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, AVGO has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

AVGO has a lot of qualities that are attracting Big Money. And since 2015, it’s made this list 20 times, with its first appearance on 12/15/2015… and gaining 340.90% since. The blue bars below show the times that Broadcom was a top pick since 2015:

Source: www.mapsignals.com

It’s been a top stock in the technology sector according to the MAPsignals process. I wouldn’t be surprised if AVGO makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The Broadcom rally could have further to go. Big money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no positions in AVGO in personal or managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Disclaimer

https://mapsignals.com/contact/

 

A Divergence Between S&P 500 and the Stock Market Breadth May Signal a Market Top

SPX Daily Chart

Based on the comparison between the Percentage of stocks above 200-Day average and the SPX for the past 10 years, the divergence happened since Feb 2021 as the SPX continue to trend higher, the number of stocks participated in the uptrend is getting lesser, deteriorated from 90% to 42% as of last Friday since Feb 2021.

In fact, many growth stocks such as Affirm Holdings (AFRM), CrowdStrike Holdings (CRWD), Fiverr International (FVRR), MercadoLibre (MELI), Sea (SE), Twilio (TWLO), DocuSign (DOCU), Roku (ROKU), PayPal Holdings (PYPL), etc…experienced big drawdowns range from 32%-65% from their all time high.

There are only a handful of outperforming stocks like Apple (AAPL), Microsoft (MSFT), Lam Research (LRCX), Broadcom (AVGO), Qualcomm (QCOM), etc… supporting the S&P 500 index.

The divergence between the SPX and the stock market breadth are certainly not a healthy sign for the bull market especially it has been persisting for nearly 10 months. It might only take a few early capitulations from the funds to trigger a broad market sell-off when the market is at the vulnerable point.

It can be noticed from the chart that 50% level is a support. When the percentage of stocks above 200-Day average dropped below 50%, there was a relatively sharp sell-off in SPX, as highlighted in orange color in 2011, 2014, 2015 and 2018. The market breadth is often acted as a leading indicator before the damage hits the SPX.

Current Market Outlook on S&P 500

S&P 500 did have a rally after an oversold condition at the support area while there was presence of demand as pointed in last week’s article. Detailed analysis can be found by watching the price volume analysis for the market outlook on YouTube.

As shown in the screenshot on 8 Dec from my private Telegram Group for Mastering Price Action Trading course above, the four US major indices – S&P 500 (SPX), Dow Jones (DJI), Nasdaq (IXIC) and Russell 2000 (RUT) are likely in a consolidation with high volatility to both sides.

It is obvious that there was an increase of supply on the down wave since Black Friday selloff, which is yet to be tested. As S&P 500 approaches the resistance zone at 4700, it could be vulnerable for a correction when the sellers step in to lock in profit or initiate short positions. Should a correction happen, the previous swing low near 4500 is a natural area for buyers to step in for bargain hunting.

It is critical to judge the supply level together with the characteristics of the price action (spread and velocity) to anticipate next move. For a bearish scenario, watch out for a Wyckoff up thrust (false breakout) with increasing supply followed by a break below 4650. For bullish case, S&P 500 needs to commit above the resistance level at 4720.

Based on the market breadth and the Wyckoff phase analysis on SPX, a trading range between 4500-4700 is expected. There could be other headwind ahead such as Fed’s tapering of the bond-buying program and an urgency for interest rate hike, which I will be discussing in my weekly live session on Sunday. Click here to visit TradePrecise.com to get your weekly market insights straight to your inbox for free.

Broadcom Could Scale to Fresh Record High on Upbeat Q4 Earnings; Target Price $632

Chipmaker and software infrastructure supplier Broadcom is expected to report earnings per share of $7.74 in the fiscal fourth quarter on Thursday, which represents year-over-year growth of over 21% from $6.35 per share seen in the same period a year ago.

The San Jose, California-based semiconductor manufacturer would post revenue growth of nearly 14% to $7.35 billion. The company has exceeded consensus earnings per share (EPS) estimates in all four of the last four quarters.

This resulted in very optimistic earnings expectations, prompting several equity analysts to raise their one-year price targets. Susquehanna raised the target price to $650 from $640. Credit Suisse lifted the target price to $620 from $580. UBS upped the target price to $660 from $580. JPMorgan increased the target price to $655 from $600. Oppenheimer raised the target price to $650 from $575.

Broadcom’s better-than-expected earnings results, which will be announced on Thursday, December 9 after the close of trading, could help the stock scale to a fresh record high. Broadcom shares rose 1.6% at $574.04 in pre-market trading on Tuesday and it is on track for third straight session gains. The stock surged over 29% so far this year.

Broadcom Stock Price Forecast

Eleven analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $632.00 with a high forecast of $660.00 and a low forecast of $600.00.

The average price target represents an 11.86% change from the last price of $564.98. All of those 11 analysts rated “Buy”, none said “Hold” or “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $572 with a high of $677 under a bull scenario and $412 under the worst-case scenario. The firm gave an “Overweight” rating on the semiconductor manufacturer’s stock.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

Broadcom (AVGO) is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec,” noted Joseph Moore, equity analyst at Morgan Stanley.

“While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in an enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

Check out FX Empire’s earnings calendar

Earnings Week Ahead: AutoZone, Campbell Soup, Lululemon and Broadcom in Focus

Earnings Calendar For The Week Of December 6

Monday (December 6)

Ticker Company EPS Forecast
SAIC Science Applications International $1.49
MDB MongoDB Inc -$0.38

 

Tuesday (December 7)

IN THE SPOTLIGHT: AUTOZONE

The Memphis, Tennessee-based auto parts retailer AutoZone is expected to report earnings per share of $20.78 in the fiscal first quarter, which represents year-over-year growth of about 12% from $18.61 per share seen in the same period a year ago.

The company, which is a major retailer and distributor of automotive replacement parts and accessories, is on track to beat earnings per share estimates again after having beaten it for 12 consecutive quarters. The company is expected to post revenue growth of about 6% to $3.33 billion.

The company is expected to earn $97.73 per share and generate $14.81 billion in revenue for the entire fiscal year, according to Zacks Research. These results demonstrate increases of 2.67 % and 1.22 % over last year, respectively.

“We see AutoZone (AZO) as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“In addition, its DIFM growth was accelerating pre-COVID-19 and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 7

Ticker Company EPS Forecast
AZO AutoZone $20.71
AHT Ashtead Group £0.62
S Sprint -$0.18
TOL Toll Brothers $2.48
CASY Casey’s General Stores $2.79
HRB H&R Block -$0.94

 

Wednesday (December 8)

Ticker Company EPS Forecast
UNFI United Natural Foods $0.58
KFY Korn Ferry International $1.37
THO Thor Industries $2.70
RH Restoration Hardware $6.62
GEF Greif $1.47
GME GameStop -$0.52
CPB Campbell Soup $0.81

 

Thursday (December 9)

IN THE SPOTLIGHT: LULULEMON ATHLETICA, BROADCOM

LULULEMON: The Vancouver-based healthy lifestyle-inspired athletic retailer is expected to report its fiscal third-quarter earnings of $1.40 per share, which represents year-over-year growth of over 20% from $1.16 per share seen in the same period a year ago.

The apparel retailer would post year-over-year sales growth of about 28% to $1.43 billion. In the last two years, the company has beaten earnings per share (EPS) estimates most of the time.

Sales are expected to be $1.4-$1.43 billion in the third quarter of fiscal 2021, representing a two-year CAGR of 24-25%. The gross margin is expected to increase 50-100bps compared to the second quarter of fiscal 2019. The company expects adjusted earnings to be between $1.33 and $1.38 per share, compared with $1.16 in the prior-year quarter and 96 cents in the third quarter of fiscal 2019, according to ZACKS Research.

Net revenues are expected to reach $6.19-$6.26 billion for fiscal 2021 compared with $5.83-$5.91 billion earlier. Earnings per share will be $7.38-$7.48 versus $6.73-$6.86 previously mentioned.

Lululemon Athletica (LULU) is a long-term topline grower, supported by compelling secular tailwinds (e.g., performance/athleisure focus), a market share gain opportunity, & credible future revenue driver (e.g., international expansion, digital growth, & product innovation/expansion into new categories). The company’s recent MIRROR acquisition offers both revenue & profitability upside, as reflected in our bull case,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

LULU dominates the NA athletic yoga apparel category due to its unique brand positioning & fashionable products. Covid accelerated consumers health & wellness focus & fashion casualization, both of which should benefit LULU.”

BROADCOM: The chipmaker and software infrastructure supplier is expected to report its fiscal fourth-quarter earnings of $7.74 per share, which represents year-over-year growth of over 21% from $6.35 per share seen in the same period a year ago. The semiconductor manufacturer would post revenue growth of nearly 14% to $7.35 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 9

Ticker Company EPS Forecast
SMDS Ds Smith £16.10
FIZZ National Beverage $0.50
HRL Hormel Foods $0.50
CIEN Ciena $0.86
ORCL Oracle $1.11
LULU Lululemon Athletica $1.40
AVGO Broadcom Inc $7.74
MTN Vail Resorts -$3.66
COST Costco Wholesale $2.57

 

Friday (December 10)

No major earnings are scheduled for release.

Chipmaker Broadcom Tops Earnings and Revenue Estimates; Analysts Raise Price Targets

Chipmaker and software infrastructure supplier Broadcom reported better-than-expected earnings and revenue in the fiscal third quarter and forecast revenue above analysts’ expectations for the next quarter, prompting several analysts to raise their one-year price targets.

The semiconductor manufacturer said its revenue climbed 16% to $6.78 billion during the quarter ended August 1, 2021. That was above the Wall Street consensus estimates of $6.76 billion.

On an adjusted basis, the global semiconductor leader earned $6.96 per share, higher than the market expectations of $6.88 per share.

Broadcom fourth-quarter revenue of about $7.35 billion, above expectations of $7.23 billion and adjusted EBITDA guidance of nearly 61% of projected revenue. The company also approved a quarterly cash dividend on its common stock of $3.60 per share.

Broadcom shares closed nearly flat at $491.90 on Thursday. The stock rose over 12% so far this year.

Analyst Comments

Broadcom (AVGO) posted EPS upside and guided slightly higher, with a notable rebound in smartphone builds, and strength in networking and broadband offset by some weakness in the enterprise. The company seems comfortable that they are shipping to end demand even as customers try to build buffer inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

AVGO is a compelling franchise in semis with diversified end-market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec. While sentiment has gradually improved, AVGO is still trading below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in enterprise, and reacceleration of cloud as tailwinds through 2021; and with the company’s net leverage reduced meaningfully it should be in the position to continue to execute on tuck-in deals in software.”

Broadcom Stock Price Forecast

Sixteen analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $550.53 with a high forecast of $580.00 and a low forecast of $475.00.

The average price target represents an 11.92% change from the last price of $491.90. From those 16 analysts, 15 rated “Buy”, one rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $572 with a high of $677 under a bull scenario and $412 under the worst-case scenario. The firm gave an “Overweight” rating to the semiconductor manufacturer’s stock.

Several other analysts have also updated their stock outlook. Piper Sandler raised the stock price forecast to $550 from $525. Evercore ISI lifted the target to $550 from $485. Cowen and company increased the target price to $500 from $478. JPMorgan upped the price target to $600 from $585. Jefferies lifted the price target to $590 from $550.

Broadcom (AVGO) beat and raised on 19% YY growth in Semis with 17% / 13% QQ in networking and storage. AVGO expects sustained 14% YY growth for Oct Q with strength led by Wireless (next-gen smartphone launch) and Storage (enterprise recovery). We think a capital return commitment with share buybacks could be a catalyst to re-ratings. AVGO’s unique visibility and measured supplying process lowers risk. Raise price target to $590 on 18xCY 2022 EPS, ~7% discount to SOX,” noted Mark Lipacis, equity analyst at Jefferies.

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Chipmaker Broadcom Tops Q1 Earnings Estimates; Target Price $525

Chipmaker and software infrastructure supplier Broadcom reported better-than-expected earnings and revenue in the fiscal second quarter and expects revenue above analysts’ expectations for the current quarter.

The semiconductor manufacturer said its revenue climbed to $6.61 billion during the quarter ended May 2, 2021, up from $5.74 billion seen in the same period a year ago. That was above the Wall Street consensus estimates of $6.51 billion.

On an adjusted basis, the global semiconductor leader earned $6.62 per share, higher than the market expectations of $6.43 per share.

Broadcom forecasts its third quarter of the fiscal year 2021, ending August 1, 2021, revenue at nearly $6.75 billion and adjusted EBITDA at about 60%. That was higher than the Wall Street consensus estimates of $6.6 billion.

But the upbeat results did not help stocks, which fell about 2% to $464.8 on Thursday. The stock rose over 6% so far this year.

Analyst Comments

“Upside on broadband and wireless drove a beat in the quarter. Broadcom expects strength in semiconductors to continue into the July quarter, led by strength in broadband, hyperscale and an improvement in enterprise. Remain Overweight and increase price target to $555,” noted Craig Hettenbach, equity analyst at Morgan Stanley.

Broadcom (AVGO) is a compelling franchise in semis with diversified end market exposure, product cycle momentum in wireless and networking, and market leadership. Furthermore, we take a more constructive view than investors on the company’s software strategy, particularly its purchase of Symantec. While sentiment has gradually improved, AVGO is still trading 7X turns below the SOX on a P/E basis despite superior margins and FCF. We see an increase in 5G $ content, a rebound in enterprise, and reacceleration of cloud as tailwinds heading into 2021. And with the company’s net leverage reduced meaningfully it should be in the position to execute on tuck-in deals in software.”

Broadcom Stock Price Forecast

Seventeen analysts who offered stock ratings for Broadcom in the last three months forecast the average price in 12 months of $525.75 with a high forecast of $575.00 and a low forecast of $440.00.

The average price target represents a 13.11% increase from the last price of $464.80. Of those 17 analysts, 15 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $555 from $538 with a high of $657 under a bull scenario and $404 under the worst-case scenario. The firm gave an “Overweight” rating on the semiconductor manufacturer’s stock.

Several other analysts have also updated their stock outlook. JP Morgan raised the target price to $585 from $570. Cowen lifted the target price to $478 from $470. Piper Sandler increased the target price to $525 from $500. UBS upped the target price to $530 from $510. Citigroup raised the price target to $500 from $470.

“A very clean F2Q beat on broad-based robust demand with an above consensus F3Q outlook on continuation of existing trends. Cloud/networking spending remains resilient with surprisingly resurgent Broadband trends offsetting continued soft but set to improve Enterprise spending,” noted Matthew D. Ramsay, equity analyst at Cowen.

“As expected, Wireless was down on seasonally with consistent contributions via Software. PT to $478, reit Market Perform,”

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Best Dividend Stocks May 2021

The hallmark way I go about finding the best dividend stocks…the outliers, is by looking for quiet Big Money trading activity. Oftentimes, that can be institutional activity. I’ll go over why following the Big Money is so important in a bit. But, the 5 stocks I see as long-term dividend growth candidates are AAPL, BLK, LOW, AVGO, & GRMN.

Over decades, I’ve learned that the true tell on great stocks is that big money consistently finds its way into the best companies out there… especially dividend paying stocks. Some of the biggest returns ever have come from holding stocks for many years and reinvesting dividends.

I want the odds on my side when looking for the highest quality dividend stocks…and I own many of them.

So, let’s get into it.

Up first is Apple, Inc. (AAPL), which happens to be the largest company on planet earth. They are a technology firm with popular products like iPhones, iPads, & iTunes.

Let’s first start with the technical picture.

When deciding on a strong candidate for long-term dividend growth, I like to look for stocks seeing upward momentum:

  • 1 month performance (+10.98%)
  • Historical Big Money buy signals

Below are the Big Money signals Apple has made since 2017. Green bars are showing that AAPL was likely being bought by an institution according to MAPsignals. Typically, the more Big Money signals, the stronger the stock:

Chart, line chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, AAPL has a strong dividend history:

  • 3-year dividend growth rate (+9.8%)
  • Current dividend per share = .205
  • Forward yield = .61%
  • 3-year earnings growth rate (+13.26%)

Next up is BlackRock, Inc. (BLK), which is a leading asset manager company. They have a long dividend history and shares have been in an uptrend recently.

When deciding on a strong candidate for long-term dividend growth, it’s a good idea to look for many years of dividend increases.

Now let’s look at recent performance:

  • 1 month performance (+7.98%)
  • Historical big money signals

Below are the big money signals that BlackRock has made since 2017. It’s clear the stock has seen green recently.

Chart, line chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, BlackRock has a nice dividend history. Their earnings growth has been stellar as well:

  • 3-year dividend growth rate (+13.2%)
  • Current dividend per share = 4.13
  • Forward yield = 2.03%
  • 3-year earnings growth rate (+2.14%)

Next, I’m looking at Lowes Companies Inc. (LOW), which is a leading home improvements chain. They have a solid dividend history.

When deciding on a strong candidate for long-term dividend growth, recent performance in the shares is important:

  • 1 month performance (+5.92%)
  • Recent Big Money signals

Below are the big money signals that Lowe’s has made since 2017. It’s clear the stock has been in a nice uptrend:

Chart, line chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you should look under the hood to see if the fundamental picture supports a long-term investment. As you can see, LOW has a strong dividend history:

  • 3-year dividend growth rate (+13.3%)
  • Current dividend per share = .60
  • Forward yield = 1.19%
  • 3-year earnings growth rate (+34.66%)

Next, I’m looking at Broadcom, Inc. (AVGO), which is a leading semiconductor company. The shares have been on a tear this year.

When deciding on a strong candidate for long-term dividend growth, recent muted performance is not a bad thing:

  • 1 month performance (-.16%)
  • Recent Big Money signals

Below are the Big Money signals that Broadcom has made since 2017.

Chart Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, let’s check up on the fundamentals. As you can see, Broadcom has a strong dividend history.

  • 3-year dividend growth rate (+47.2%)
  • Current dividend per share = 3.60
  • Forward yield = 3.09%
  • 3-year earnings growth rate (+174.18%)

Lastly, I’m looking at Garmin Ltd. (GRMN), which is a leading navigational company.

When deciding on a strong candidate for long-term dividend growth, I like to look for recent leaders:

  • 1 month performance (+8.99%)
  • Historical Big Money signals

Below are the Big Money signals that Garmin has made since 2017.

Chart, histogram Description automatically generated

Source: MAPsignals, End of day data sourced from Tiingo.com

On top of technicals, when deciding on the best dividend stock, you gotta see if the fundamental picture supports a long-term investment. Garmin has been a steady grower:

  • 3-year dividend growth rate (+5.6%)
  • Current dividend per share = .67
  • Forward yield = 1.9%
  • 3-year earnings growth rate (+13.09%)

The Bottom Line

AAPL, BLK, LOW, AVGO, & GRMN represent solid dividend choices. Given the strong historical dividend growth and Big Money signals, these stocks could be worth an extra look for a dividend investor.

Disclosure: the author holds long positions in personal and managed accounts in GRMN. He doesn’t hold positions in AAPL, BLK, LOW, & AVGO at the time of publication.

To learn more about the MAPsignals process, click here.

Disclaimer