Broadcom Inc: 5G Giant in Record Territory Off Strong Q4 Results

Broadcom Inc

Broadcom Stock Rallies 36% in 2020, But 2021 More Bullish

Broadcom Inc (NASDAQ:AVGO) is an industry giant with a market cap of $175.8 billion. You don’t expect this kind of stock to make massive gains. Instead, investors rely on them for consistent, reliable gains.

And they’ve been able to do just that when it comes to Broadcom.

From the start of 2013 until the close of 2019, Broadcom’s share price expanded at a compound annual growth rate (CAGR) of 41.5%. In spite of the coronavirus pandemic, AVGO stock has continued to outperform the broader market.

As of this writing, Broadcom stock is up 33.8% year-over-year and 36.3% year-to-date. And it has soared an eye-watering 177% since bottoming in March. Investors late to the party have still done well. Since the start of November, AVGO stock has climbed an impressive 22.5%.

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Suffice it to say, Broadcom has rewarded buy-and-hold investors with market-trouncing capital appreciation. But it also provides investors with strong dividend growth.

Between fiscal 2016 and 2021, Broadcom’s dividend had a CAGR of 49%, climbing from $1.94 per share to $14.40 per share.

It looks like 2021 will be just as beneficial for Broadcom investors. The company reported strong fiscal fourth-quarter revenue and earnings growth. Management hiked its quarterly dividend by 11% to $3.60 per share and said it expects first-quarter 2021 revenue to climb 13%.

Chart courtesy of StockCharts.com

Broadcom Inc Overview

Broadcom Inc is a diversified, global company that develops and manufactures semiconductor and infrastructure software products. (Source: “Broadcom Inc., Company Overview, December 2020,” Broadcom Inc, last accessed December 22, 2020.)

You can find the company’s chips in a wide variety of applications that connect us, including 5G, data centers, cybersecurity, payment security, edge computing, networking, software, broadband, wireless, artificial intelligence, and storage.

At 23,000, Broadcom has one of the industry’s biggest patent portfolios.

Strong Fourth-Quarter Results

On December 10, Broadcom Inc announced that its revenue for the fourth quarter of fiscal 2020, ended November 1, increased 12% year-over-year to $6.5 billion. (Source: “Broadcom Inc. Announces Fourth Quarter and Fiscal Year 2020 Financial Results and Quarterly Dividends,” Broadcom Inc, December 10, 2020.)

Fourth-quarter net income increased 65% year-over-year to a record $1.3 billion, or $2.93 per share. Adjusted earnings net income was up 19% at $2.9 billion, or $6.35 per share.

During the fourth quarter, Broadcom generated $3.2 billion in free cash flow from operations, compared to $2.4 billion in the same period in the previous year.

The company’s cash and cash equivalents at the end of the fourth fiscal quarter were $7.6 billion, compared to $8.8 billion at the end of the prior quarter.

Full-year revenue increased six percent year-over-year to $23.8 billion, while net income was up 8.6% at $2.9 billion, or $6.33 per share. Adjusted net income increased 5.7% to almost $10.0 billion, or $22.16 per share.

During fiscal 2020, Broadcom generated $11.6 billion in free cash flow from operations, compared to $9.3 billion in fiscal 2019.

Hock Tan, Broadcom’s president and CEO, said the following:

We concluded the year with strong fourth quarter results driven by continued demand for networking from cloud and for broadband from service providers as well as the significant ramp in wireless, even as enterprise demand remained soft. Our infrastructure software segment continued to be stable and delivered solid results.

Tan added, “Our first quarter revenue outlook, which projects continued overall strength, is expected to show 13 percent year over year growth, all organic.”

Analyst Take

Despite the challenging environment and economic uncertainties, Broadcom Inc was able to report strong fourth-quarter revenue growth and record profitability. It also provided strong guidance.

Thanks to its strong balance sheet, the company hiked its dividend by 11%. All of this bodes well for Broadcom stock investors in 2021.