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Broadcom Q3 results beat estimates, issues strong Q4 view

BroadcomThe share price of the semiconductor chip manufacturer Broadcom (NASDAQ: AVGO) declined by about $6 in the past one week after the company reported a swing to a loss in the fiscal 2016 third-quarter.

The Q3 revenue and earnings, however, surpassed the Zacks estimates. Considering the impressive fourth-quarter guidance and the interim quarterly cash dividend, we anticipate the share price to remain bullish. On Monday, the share price of Broadcom closed at $173.11, down $3.98 or 2.25% from the earlier close.

The Irvine, California-based company reported a swing to loss of $298 million or $0.75 per share on revenue of $3.79 billion.

The company recorded net income of $240 million or $0.84 per share on revenue of $1.74 billion in the third-quarter of fiscal 2015. The low-cost, fast Ethernet VOIP processor manufacturer’s third-quarter revenue was higher than the Zacks estimate of $3.749 billion.

Broadcom Limited

Excluding charges, the non-GAAP net income from continuing operations for Q3 2016 was $1.293 billion or $2.89 per share, compared to $660 million or $2.24 per share in the Q3 2015. The Zacks earnings estimate was $2.77 per share for the third-quarter of 2016.

For the fiscal 2016 fourth-quarter, Broadcom anticipates GAAP revenue of $4.09 billion. The non-GAAP revenue is expected to be about $4.10 billion. The GAAP gross margin is forecasted to be 52.25%, while the non-GAAP gross margin is predicted to be 60.50%. The company also declared an interim quarterly cash dividend of $0.51 per share. Thus, fundamentally, the stock can be expected to remain bullish during the last quarter of fiscal 2016.

The stock remains above the 50-day moving average of 164.90, thereby indicating the underlying bullishness. The chart also reveals the existence of major support (S1) at 164. The positive momentum shows that the share price would remain in an uptrend.

Broadcom Stock Price: September 6th 2016

So, a trader should speculate on the probable rise in the share price of Broadcom by picking up a one touch call option from a binary broker of choice. The historic price chart indicates that the share price would probably face resistance at $182. Having a target price of $180 or lower for the call option would benefit the trader. Likewise, a contract expiry date in the last week of September should be chosen by the trader.


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