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Broadcom (AVGO) Prices Senior Notes, Aims to Boost Balance Sheet
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Broadcom (AVGO - Free Report) recently announced the pricing of senior secured notes in five tranches of different maturities and carrying different interest rates as well.
The company prices notes worth $750 million, having interest rate of 1.95% and maturity in 2028. Another 2.45% senior notes are due 2031 worth $2.75 billion at a discounted price of 99.718%. Principal amount worth $1.75 billion carrying 2.6% interest and maturity in 2033 is priced at 99.790%.
Meanwhile, notes worth $3 billion having interest rate of 3.5% senior notes are slated to mature in 2041 and $1.75 billion of 3.75% senior notes are due 2051.
Broadcom intends to utilize the net proceeds to fund its debt tender offers and repayment of debt. The semiconductor company also plans to use the proceeds for the payment of accrued and unpaid interest, premiums, fees and expenses pertaining to debt repayments. Subject to customary closing conditions, the offering of senior notes is anticipated to close on Jan 19, 2021.
It is also commencing cash tender offers in seven different tranches of different maturities and carrying different interest rates as well, aggregating $3.5 billion.
Per the terms, the notes will be sold only to qualified institutional buyers compliant with Rule 144A under the Securities Act of 1933, as amended.
We believe the offering will boost this Zacks Rank #2 (Buy) company’s financial flexibility and help meet its financial obligations in an efficient way. Moreover, it provides ample scope to deploy capital for long-term growth opportunities and reward stockholders with higher returns.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing high demand.
Broadcom’s latest senior notes offering amid the lingering impacts of coronavirus-led economic and business uncertainties bode well. Notably, companies with improved liquidity can tide over these volatile times and Broadcom’s latest initiatives are reflective of the same.
Balance Sheet & Cash Flow Status
As of Nov 1, 2020, cash & cash equivalents were $7.618 billion compared with $8.857 billion reported as of Aug 2, 2020. The company also has access to $5 billion of untapped revolver capacity.
Broadcom stated that due to refinancing and liability management endeavors undertaken in the fiscal 2020, the company’s weighted average debt maturity is now nearly six years. The weighted average interest rate stands at 3.5%.
As of Nov 1, 2020, long-term debt (including current portion) was $41.062 billion compared with $44.023 billion as of Aug 2, 2020. The company paid down $3 billion of its total debt in the fiscal fourth quarter.
The company generated cash flow from operations of $3.348 billion compared with $3.178 billion in the previous quarter. Capital expenditure totaled $102 million compared with the last reported quarter’s figure of $105 million. Free cash flow during the quarter was $3.246 billion compared with 3.073 billion in the prior quarter.
During the fiscal fourth quarter, Broadcom returned $1.3 billion in form of dividends to shareholders. The company paid an additional $185 million for elimination of 500,000 of company’s shares.
Broadcom is committed to returning half of the normalized free cash flow generated in the previous year to shareholders as cash dividends. As part of this strategy, the company announced an 11% hike in its quarterly dividend to $3.60.
One Year Price Performance
Offering to Boost Financial Flexibility
Debt to Capital & Liquidity
As of Nov 1, 2020, Broadcom had a net debt of $33.44 billion. Notably, total debt to total capital of 63.2% is much higher than the prior quarter’s figure of 56.8%. Further, times interest earned is 2.4X compared with the prior quarter’s figure of 2.5X.
The latest senior notes offerings are expected to provide cushion to Broadcom’s balance sheet with ample liquidity and financial strength to survive amid the coronavirus outbreak induced macroeconomic crisis.
Other Noteworthy Factors
Broadcom’s near-term prospects look promising as it is well-positioned to benefit from robust adoption of Wi-Fi 6 in access gateway, and cable DOCSIS 3.1 products.
Acceleration in 5G deployment, significant production ramp up and increase in radio frequency (RF) content favors prospects.
Moreover, synergies from acquisitions of CA and Symantec’s enterprise security business are anticipated to bolster the company’s presence in infrastructure software vertical. The company also provided encouraging guidance for first quarter of fiscal 2021 on strong uptick in wireless revenues.
The company is also expected to gain from recovery in demand across industrial and automotive end-markets, courtesy of reopening of economies and easing shelter-in-place guidelines.
These factors are anticipated to drive revenues in the quarters ahead and instill investor optimism in the stock.
Nevertheless, anticipated sluggishness in enterprise demand is likely to affect revenues from Brocade and server storage businesses.
Long-term earnings growth rate for Micron, NVIDIA and MACOM Technology are currently pegged at 12.33%, 18.26% and 30.94%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Broadcom (AVGO) Prices Senior Notes, Aims to Boost Balance Sheet
Broadcom (AVGO - Free Report) recently announced the pricing of senior secured notes in five tranches of different maturities and carrying different interest rates as well.
The company prices notes worth $750 million, having interest rate of 1.95% and maturity in 2028. Another 2.45% senior notes are due 2031 worth $2.75 billion at a discounted price of 99.718%. Principal amount worth $1.75 billion carrying 2.6% interest and maturity in 2033 is priced at 99.790%.
Meanwhile, notes worth $3 billion having interest rate of 3.5% senior notes are slated to mature in 2041 and $1.75 billion of 3.75% senior notes are due 2051.
Broadcom intends to utilize the net proceeds to fund its debt tender offers and repayment of debt. The semiconductor company also plans to use the proceeds for the payment of accrued and unpaid interest, premiums, fees and expenses pertaining to debt repayments. Subject to customary closing conditions, the offering of senior notes is anticipated to close on Jan 19, 2021.
It is also commencing cash tender offers in seven different tranches of different maturities and carrying different interest rates as well, aggregating $3.5 billion.
Per the terms, the notes will be sold only to qualified institutional buyers compliant with Rule 144A under the Securities Act of 1933, as amended.
We believe the offering will boost this Zacks Rank #2 (Buy) company’s financial flexibility and help meet its financial obligations in an efficient way. Moreover, it provides ample scope to deploy capital for long-term growth opportunities and reward stockholders with higher returns.
Borrowing costs continue to be low, enabling companies to obtain easy financing. With the U.S. treasuries offering low rates, corporate bonds and borrowings from banks are now witnessing high demand.
Broadcom’s latest senior notes offering amid the lingering impacts of coronavirus-led economic and business uncertainties bode well. Notably, companies with improved liquidity can tide over these volatile times and Broadcom’s latest initiatives are reflective of the same.
Balance Sheet & Cash Flow Status
As of Nov 1, 2020, cash & cash equivalents were $7.618 billion compared with $8.857 billion reported as of Aug 2, 2020. The company also has access to $5 billion of untapped revolver capacity.
Broadcom stated that due to refinancing and liability management endeavors undertaken in the fiscal 2020, the company’s weighted average debt maturity is now nearly six years. The weighted average interest rate stands at 3.5%.
As of Nov 1, 2020, long-term debt (including current portion) was $41.062 billion compared with $44.023 billion as of Aug 2, 2020. The company paid down $3 billion of its total debt in the fiscal fourth quarter.
The company generated cash flow from operations of $3.348 billion compared with $3.178 billion in the previous quarter. Capital expenditure totaled $102 million compared with the last reported quarter’s figure of $105 million. Free cash flow during the quarter was $3.246 billion compared with 3.073 billion in the prior quarter.
During the fiscal fourth quarter, Broadcom returned $1.3 billion in form of dividends to shareholders. The company paid an additional $185 million for elimination of 500,000 of company’s shares.
Broadcom is committed to returning half of the normalized free cash flow generated in the previous year to shareholders as cash dividends. As part of this strategy, the company announced an 11% hike in its quarterly dividend to $3.60.
One Year Price Performance
Offering to Boost Financial Flexibility
Debt to Capital & Liquidity
As of Nov 1, 2020, Broadcom had a net debt of $33.44 billion. Notably, total debt to total capital of 63.2% is much higher than the prior quarter’s figure of 56.8%. Further, times interest earned is 2.4X compared with the prior quarter’s figure of 2.5X.
The latest senior notes offerings are expected to provide cushion to Broadcom’s balance sheet with ample liquidity and financial strength to survive amid the coronavirus outbreak induced macroeconomic crisis.
Other Noteworthy Factors
Broadcom’s near-term prospects look promising as it is well-positioned to benefit from robust adoption of Wi-Fi 6 in access gateway, and cable DOCSIS 3.1 products.
Acceleration in 5G deployment, significant production ramp up and increase in radio frequency (RF) content favors prospects.
Moreover, synergies from acquisitions of CA and Symantec’s enterprise security business are anticipated to bolster the company’s presence in infrastructure software vertical. The company also provided encouraging guidance for first quarter of fiscal 2021 on strong uptick in wireless revenues.
The company is also expected to gain from recovery in demand across industrial and automotive end-markets, courtesy of reopening of economies and easing shelter-in-place guidelines.
These factors are anticipated to drive revenues in the quarters ahead and instill investor optimism in the stock.
Nevertheless, anticipated sluggishness in enterprise demand is likely to affect revenues from Brocade and server storage businesses.
Other Key Picks
Some better-ranked stocks in the broader sector are Micron (MU - Free Report) , NVIDIA (NVDA - Free Report) and MACOM Technology (MTSI - Free Report) . All the stocks flaunt a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Micron, NVIDIA and MACOM Technology are currently pegged at 12.33%, 18.26% and 30.94%, respectively.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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