Qualcomm Inc (QCOM)

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Broadcom Shares Pummeled on Downgrade
Friday April 21, 11:50 am ET
Broadcom Shares Slip on Downgrade, Despite Solid 1Q Results

http://biz.yahoo.com/ap/060421/broadcom_mover.html?.v=1

NEW YORK (AP) -- Investors sold off shares of Broadcom Corp., an Irvine, Calif.-based semiconductor maker, in Friday's trading session, despite the company reporting its first-quarter profit nearly doubled, in line with analysts' consensus estimates.

Caris Company analyst Rick Whittington wasn't gushing, though. He downgraded the stock from "Buy" to "Average" and said that even if the company's second-quarter guidance proves conservative -- the company projected a 3 percent to 5 percent increase in second-quarter revenue in Tuesday's conference call -- the stock is already fairly valued.

Shares of Broadcom, which have traded between $19.01 and $50 over the last year, fell $1.92, or 4.2 percent, to $43.85 in midday trading on the Nasdaq.

And Whittington wasn't alone with his concerns. Although UBS analyst Alex Gauna lifted his 2006 and 2007 earnings estimates to $1.50 and $1.60 per share, respectively, from $1.40 and $1.55 per share, and raised his target price to $60 from $55, he warned that it could be difficult for the company to deliver dramatic upside in the future.

"We caution that research and development costs are also rising and that the law of large numbers on sales and higher share count (post split) will make it increasingly difficult to deliver big upside to consensus," Gauna wrote in a research note.

In February, Broadcom completed a three-for-two stock split. There were most recently an estimated 524.4 million outstanding shares.