Broadcom Stock Boosted By Upgrade, Ambitious Price Target

Nomura expects the Apple supplier to hike its dividend

Managing Editor
Sep 17, 2018 at 10:08 AM
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Shares of Broadcom Inc (NASDAQ:AVGO) are up 0.9% to trade at $238.54 this morning, after Nomura upgraded the chip giant to "buy" from "neutral," and hiked its price target to $300 from $225. The analyst in coverage finally sees the upside of the company's recent CA Technologies (CA) acquisition, and anticipates the company to raise its dividend to $9 per share in the near future. 

The new price target represents a 27% premium to the stock's Friday closing price, while the closest AVGO has come to the $300 level was $285.68 back in late November. More recently though, the stock has rallied 21% off its mid-July bottom just below $200, thanks to an upbeat earnings reaction earlier this month. Today's price action puts the shares above their 160-day moving average for just the second time in the past three months. 

Options traders have preferred AVGO calls in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security sports a 50-day call/put volume ratio of 3.40, which ranks 1 percentage point from an annual high. This shows the rate of call buying relative to put buying has been much quicker than usual in the past two months.

The good news for those purchasing premium is that near-term options are attractively priced right now, from a volatility perspective. This is based on AVGO's Schaeffer's Volatility Index (SVI) of 26%, which arrives in the 18th percentile of its annual range.

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