Positive Trend
In addition to the improved demand conditions in the market, the cyclical nature of the industry also adds to the positive momentum. The improvement in the macroeconomic backdrop since the previous quarter increases the chances of third-quarter results beating estimates, as they did in each of the trailing four quarters.
Also read: Is semiconductor industry returning to growth mode?
The fast-growing smartphone industry and the roll-out of 5G, which requires a steady supply of processors, brightens the long-term growth prospects. While analysts, in general, predict a strong year for the industry, some remain skeptical due to the uncertainties related to the trade war.
Past Performance
For the second quarter, the company reported mixed results that disappointed investors. Though earnings rose 7% to $5.21 per share aided by a 10% revenue growth, a marked decline in the core business segment Semiconductor Solutions and downward revision of full-year outlook spurred a stock selloff. The results also topped the Street view.
Last month, Broadcom acquired the struggling enterprise security business of cybersecurity expert Symantec for about $11 billion. The management expects cost synergies of about $1 billion from the combination a year after the completion of the transaction.
Competition
In July, rival chipmaker Intel (INTC) reported stronger-than-expected profit and revenues for the second quarter. Earnings moved up 2% annually to $1.06 per share, while revenues dropped 3% to $16.5 billion, mainly reflecting the softness in the data center business.
Related: Broadcom Q2 2019 Earnings Conference Call Transcript
After retreating from the record high in April, Broadcom shares witnessed significant volatility in the following weeks. The stock gained about 16% since the beginning of the year and 26% in the past twelve months.