Option Trade 
Avago Technologies Ltd (NASDAQ:AVGO) Calls 
Thursday, September 10, 2015

**OPTION TRADE: Buy the AVGO Oct 2015 135.000 call (AVGO151016C00135000) at approximately $4.00. Place a pre-determined sell at $8.00. Note: No protective stop losses added as yet -- but if you wish to do so make it $1.60.

by Ian Harvey

September 10, 2015

Introduction

Avago Technologies Ltd (NASDAQ: AVGO), a designer, developer and global supplier of a range of analog semiconductor devices with a focus on III-V based products, has just received analyst coverage from Sterne Agee CRT, setting a “buy” rating on the semiconductor manufacturer’s stock.

Several other equities research analysts have also recently commented on the company, as mentioned further below in this report. But it is interesting to note that there have been no less than 25 analysts providing a “buy” or “strong buy” for Avago, compared to one sell and three hold.

Also, Avago Technologies Limited stock has received a short term price target of $ 159.35.

Technical Details

The firm has a market cap of $34.23 billion and a P/E ratio of 33.88. Avago Technologies has a 12-month low of $68.75 and a 12-month high of $150.50.

The stock’s 50 day moving average price is $123.71 and its 200-day moving average price is $128.47.

Earnings

Previous Earnings

Avago Technologies last released its quarterly earnings data on Wednesday, August 26th. The semiconductor manufacturer reported $2.24 EPS for the quarter, beating the Thomson Reuters consensus estimate of $2.14 by $0.10.

During the same quarter in the prior year, the firm earned $1.26 EPS. The firm had revenue of $1.74 billion for the quarter, compared to the consensus estimate of $1.74 billion. The company’s revenue was up 36.0% compared to the same quarter last year. On average, analysts predict that Avago Technologies will post $8.85 earnings per share for the current fiscal year.

Future Earnings

Analysts continue to see 30 percent-plus earnings per share accretion in 21016 as the company looks to integrate Broadcom into its business model and create synergies.

Positive Factors

Avago is more diversified than Qorvo Inc, Cirrus Logic, Inc. and Skyworks Solutions Inc. This has worked in Avago's favor as Apple and Google Inc continue to fluctuate.

Avago’s last quarter was pretty good, and we profited quite nicely from it. The fact that everybody thought the world was ending and everybody thinks the Chinese market is this huge detriment…the fact that Avago just guided in-line sort of says that business is probably pretty good.

Avago's wireless (35 percent of sales) benefited from iPhone 6s' pre-builds and the ongoing GS6 ramp.

Storage (34 percent of sales) benefited from a full quarter of Emulex (following its acquisition earlier this year), as well as strong datacenter demand.

Analysts Opinions

On August 27th, Brean Capital maintained their rating on the shares of Avago Technologies Limited. The current rating of the shares is "Buy” with a price target to $170 per share.

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

• Bank of America reiterated a “buy” rating and set a $150.00 price target on shares of Avago Technologies in a report on Sunday, May 17th.

• Barclays started coverage on Avago Technologies in a research note on Tuesday, May 12th. They issued an “overweight” rating and a $145.00 price objective for the company.

• Mizuho started coverage on Avago Technologies in a research report on Thursday, May 21st. They set a “buy” rating and a $150.00 price target on the stock.

• Credit Suisse reaffirmed a “buy” rating and issued a $140.00 price target on shares of Avago Technologies in a report on Tuesday, May 26th.

• Finally, RBC Capital began coverage on Avago Technologies in a research report on Monday, August 17th. They set an “outperform” rating and a $150.00 price objective on the stock.

One research analyst has rated the stock with a sell rating, three have assigned a hold rating, twenty-four have issued a buy rating and one has given a strong buy rating to the stock. Avago Technologies presently has an average rating of “Buy” and an average target price of $153.19.

Harvey’s Options Volatility Indicator

Conclusion

If you look at Avago, they just missed [sales], it's not that serious. The impact from China is less severe than many people have been assuming. Based on the numbers Avago put in, it is now recovering the decline in value, and more is on the horizon.

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the AVGO Oct 2015 135.000 call (AVGO151016C00135000) at approximately $4.00. Place a pre-determined sell at $8.00. Note: No protective stop losses added as yet -- but if you wish to do so make it $1.60.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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