Avago Technologies Ltd (AVGO) Acquisition: A Good or Bad Move?

Avago Technologies Ltd (AVGO) Acquisition: A Good or Bad Move?

By Carly Forster 

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Avago Technologies Ltd (NASDAQ:AVGO) is a California and Singapore joint based company that designs, develops, and supplies a broad range of analog, digital, mixed signal and optoelectronics components and subsystems. It was recently revealed that the company finished the acquisition of LSI Corp (NASDAQ:LSI), an electronics company in San Jose, California. Seagate, an American data storage company, will obtain the assets of LSI’s Accelerated Solutions Division and Flash Components Division from Avago Technologies Ltd (NASDAQ:AVGO) for $450 million in cash.

The total cost of Avago Technologies Ltd (NASDAQ:AVGO) acquisition of LSI Corp (NASDAQ:LSI) was about $6.6 billion. Avago Technologies President and CEO, Hock Tan, explained, “The third quarter marks a transformative event in Avago’s history as we completed the acquisition of LSI, creating a substantially larger company with a much more diversified and balanced mix of end markets.” Seagate claimed it would acquire the assets of LSI’s accelerated solutions division and flash components division from Avago Technologies, to improve its contribution among an increasing flash-storage market.

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Avago Technologies last released its quarterly earnings report on Thursday, May 29th. The technology company reported $0.85 earnings per share, beating analysts’ consensus estimate of $0.76 by $0.09. During the same quarter last year, Avago Technologies Ltd (NASDAQ:AVGO) reported $0.61 earnings per share. The company had a profit of $901.00 million for the quarter, compared to analysts’ consensus estimate of $679.59 million. Avago’s quarterly proceeds were up 24.7% on a year-over-year basis. On average, analysts’ predict Avago will post $3.74 earnings per share for the current fiscal year.

Shares of Avago Technologies Ltd (NASDAQ:AVGO) opened at $71.85 on Friday, May 30. The company has a 1-year high of $72.00 and a 1-year low of $35.62. The stocks daily moving average is $70.71 and has a 50-day moving average of $65.25. The market cap for the technology company is $17.74 billion and its P/E ratio is 29.72

On May 28, RBC Capital analyst Doug Freedman gave Avago an Outperform rating with an $82 price target. He noted, “Expectations are very high. We view Avago as a stock to add to a position on weakness rather than a stock to bid to new highs.” Freedman has a +9.6% average return and a 70% success rate according to TipRanks.

On May 30, Canaccord Genuity analyst Michael Walkley also gave the stock a BUY rating with an $83 price target. He reasoned, “The LSI Corp (NASDAQ:LSI) acquisition positions Avago Technologies Ltd (NASDAQ:AVGO) as a well-diversified semiconductor company with a balanced exposure to several diverse global growth markets.” Walkley has a +3.3% average return and a 59% success rate.

On the other hand, on May 30, J.P Morgan analyst Christopher Danley gave the technology company an HOLD rating. He has a -9.2% average return and a 43% success rate.

Avago Technologies Limited (AVGO) currently has an analyst consensus of MODERATE BUY.

Carly Forster writes about stock market news. She can be reached at Carly@tipranks.com

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