Options Trade – Broadcom Corporation (NASDAQ:BRCM) Calls  Wednesday, December 03, 2014

**OPTIONS TRADE: Buy the BRCM May 2015 45.000 call (BRCM150515C00045000) at or under $2.00, good for the day. Place a protective stop loss at $0.80 and a pre-determined sell at $4.00.

by Ian Harvey

December 03, 2014


Ever since smashing earnings last month, Broadcom Corporation (NASDAQ: BRCM), a global semiconductor solution for wired and wireless communications, has been on a tear. The stock has been consolidating between $41 and $43 for a couple weeks, and now seems primed to move higher.

Broadcom shares have soared 42% year to date to crush the market, bouncing back from a terrible second half of 2013. The re-imagined business mix looks like exactly the right medicine for what ailed Broadcom last year.

Also, shares of Broadcom have received a consensus recommendation of “Buy” from the thirty-nine brokerages that are currently covering the stock.

Technical Details

Broadcom has a one year low of $26.52 and a one year high of $43.16. The stock’s 50-day moving average is $40.02 and its 200-day moving average is $38.11. The company has a market cap of $25.533 billion and a P/E ratio of 59.23.


Broadcom last announced its earnings results on Tuesday, October 21st. The company reported $0.91 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.84 by $0.07. The company had revenue of $2.26 billion for the quarter, compared to the consensus estimate of $2.18 billion.

During the same quarter in the previous year, the company posted $0.76 earnings per share. The company’s revenue for the quarter was up 5.3% on a year-over-year basis. On average, analysts predict that Broadcom will post $2.93 earnings per share for the current fiscal year.

Continued Growth

Video encoding chips for 4K video devices should help Broadcom grow its broadband communications division in coming years, while connected devices provide a similar boost for the mobile and infrastructure segments.

On a longer timeline, Broadcom is revamping its overall business mix. The company is closing out its wireless baseband products line, with has become a low-margin drag on earnings.

Analysts Opinions

Broadcom (NASDAQ:BRCM) has been given an “A” credit rating by analysts at Morningstar. The firm’s “A” rating suggests that the company is a low default risk. They also gave their stock a three star rating.

The company has also been the subject of a number of other research reports:-

• Analysts at Goldman Sachs upgraded shares of Broadcom from a “neutral” rating to a “buy” rating in a research note on Thursday, November 13th. They now have a $48.00 price target on the stock, up previously from $40.00.

• Separately, analysts at Deutsche Bank reiterated a “buy” rating on shares of Broadcom in a research note on Friday, October 31st. They now have a $47.00 price target on the stock.

• Finally, analysts at Zacks downgraded shares of Broadcom from an “outperform” rating to a “neutral” rating in a research note on Monday, October 27th. They now have a $42.00 price target on the stock.

One equities research analyst has rated the stock with a sell rating, twelve have assigned a hold rating and twenty-two have assigned a buy rating to the stock. The company currently has an average rating of “Buy” and an average target price of $42.19.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the BRCM May 2015 45.000 call (BRCM150515C00045000) at or under $2.00, good for the day. Place a protective stop loss at $0.80 and a pre-determined sell at $4.00.

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