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Examining the financial results of Broadcom for 2021 year
Broadcom (NASDAQ: AVGO) - one of the world's largest representatives of the semiconductor industry with more than 22 thousand patents.
In early December, the company presented its annual report for 2021, which reflected double-digit growth in all financial indicators year-on-year:
- revenue increased by 15% - up to 7.407 billion dollars - due to increased demand from customers;
- Adjusted EBITDA increased by 19% - from 3.827 to 4.547 billion dollars - against the backdrop of a recovery in industrial activity;
- net profit added 50% - increased to $ 1.989 billion, and earnings per share rose to 4,45 $;
- management announced an increase in its quarterly dividend and the launch of a new share buyback amid a record 2021 Adjusted EBITDA margin in 60%, which generated an annual free cash flow of $ 13.3 billion.
Let's figure it out, how the company succeeded and what awaits it in the future.
What the company makes money on
Broadcom's business can be divided into two segments:
- Semiconductor manufacturing.
- Infrastructure software.
The company creates solutions based on analog and digital semiconductor technology and consists of 5 subsegments, which are named according to the client principle:
- Networking - network services.
- Wireless - wireless communication.
- Broadband - broadband connection.
- Storage - data storage systems.
- Industrial - solutions for industrial enterprises.
Revenue from referral to 4 quarter grew by 17% - up to 5.634 billion dollars - against the background of strong results of the main sub-segments.
Networking. Revenue from clients, who provide network services, increased by 13% - up to $ 1.9 billion - and amounted to 34% of the overall segment result. The main reason for the growth is increased demand. Based on current data, the company expects, what sub-segment in 1 quarter of 2022 will show an acceleration in growth rates by 30%.
Wireless. Revenue from wireless customers increased by 21% - up to $ 1.8 billion - against the backdrop of the start of sales of new generation smartphones. Given the high base of last year, management expects, that segment revenues in 1 quarter of 2022 will grow by less than 10%.
Broadband. Revenue increased by 29% - up to 0.872 billion dollars. Strong results are attributed to strong growth in vendor and customer deployments of next-generation Broadcom PONs with Wi-Fi access gateways 6 and 6C. Forecast for next quarter - maintaining double-digit growth rates.
Storage. Forecast for next quarter - maintaining double-digit growth rates 21% Forecast for next quarter - maintaining double-digit growth rates. Outperforms Broadcom forecasts as enterprises resume spending to upgrade their computing and storage infrastructure. IN 1 in the quarter of 2022, management calculates, that customer spending will continue to recover and drive server storage connectivity revenues up to about 30%.
Industrial. Revenue from industrial enterprises added 36% and rose to $ 0.232 billion thanks to strong demand from electric vehicle manufacturers, robotics and automated production systems. IN 1 the company expects similar growth in the quarter of 2022.
Infrastructure software. The company creates software solutions for planning, development, automation, management and protection of client applications or systems. IN 4 quarter, the segment increased by only 8% - up to $ 1.773 billion. Forecast of 1 the management has no quarter of 2022.
Key financial results, billion dollars
|EBITDA margin||59%||61%||2 P. P.|
Broadcom revenue by segment in 4 quarter of 2021, billion dollars
|Broadcom total revenue||7,407|
Management presented forecasts of financial results for 1 quarter of 2022:
- Broadcom's total revenue will grow by 14% - up to 7.6 billion dollars.
- Semiconductor revenue including wireless sub-segment (Wireless) will increase by 17%, and without him - on 28%.
- Adjusted EBITDA of $ 4.674 billion, and EBITDA margin - 61,5%.
- According to the calculations of the management, the number of traded shares of the company in the first quarter will be 448 million pieces.
- Broadcom will continue to pursue its principle and highlight 50% free cash flow for dividends. It is for this reason that the payment for 1 quarter was increased by 14% - to 4,1 $, in the future, management intends to allocate the same quarterly dividend.
Comparison with competitors
2021 became the year of Broadcom: the company showed record financial results amid increased demand for products, settled her antitrust issues with the FTC and had a nice investor day. All these factors allowed the company to show stronger market dynamics in comparison with its main competitors..
Comparison with competitors
|EV / EBITDA||P / E||Net debt / EBITDA|
The company's management announced, what will pay the next quarterly dividend 31 December in the amount 4,1 $ per share. The dividend will grow by 14%, and the dividend yield will be 0,6%.
In addition to raising dividends, the board of directors also announced a new $ 10 billion share buyback program., which will be valid until 31 December 2022. Taking into account Broadcom's current capitalization of $ 260 billion, shareholders will receive an additional return from the buyback in 2022 of 3,8%.
What is the bottom line
Broadcom Delivers Strong Q4 2021 Financial Results, thanks to which the management announced large dividend payments to shareholders in 2022 in the amount of 6,2%, out of which 2,4% investors will receive dividends, and the rest 3,8% will be distributed through buyback.
Immediately after the publication of the report from 32 market analysts, who follow Broadcom, 18 increased their target prices, resulting in the average cost target increased from 578.93 to 664,72 $. The current market recommendations are distributed as follows:
- "Buy" - 27.
- "Hold" - 4.
- "Sell" - 1.