We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Broadcom Launches Bid for Qualcomm: Semiconductor ETFs Surge
Read MoreHide Full Article
Another wave of mergers and acquisitions has lashed on the hot semiconductor space. This is especially true as communications’ chipmaker Broadcom (AVGO - Free Report) has make an unsolicited bid to acquire the smartphone chip supplier Qualcomm (QCOM - Free Report) for $70 per share or $130 billion, including debt. The news was first flashed on Bloomberg last week.
Under the terms of the bid, Broadcom would pay $60 per share in cash and $10 per share in Broadcom stock. This represents a 13% premium to Friday's closing price of $61.81.
By acquiring Qualcomm, Broadcom could become the third-largest chipmaker, behind Intel Corp. (INTC - Free Report) and Samsung Electronics. This is because the combination would mix Qualcomm’s dominance of chips that connect handsets to wireless networks with Broadcom’s expertise in chips that link devices to Wi-Fi networks (read: Here's What Investors Need to Know About Soaring Semiconductor ETFs).
The combination would represent the biggest technology acquisition in history, dwarfing Dell Inc.’s $67 billion buyout of EMC in 2015. In addition, Broadcom is also expected to acquire NXP Semiconductors (NXPI - Free Report) , which Qualcomm agreed to buy in 2016 for $38 billion. The takeover is yet to be completed due to an ongoing antitrust investigation.
The Broadcom-Qualcomm deal, if struck, would face heavy regulatory scrutiny given their sheer size, and heavy level of consolidation in the chip industry. The Bloomberg report came in a month when an ongoing legal battle with Apple (AAPL - Free Report) over wireless chip pricing, patents and alleged anticompetitive behavior has led to weak trading in Qualcomm’s stock. Before the report, shares of QCOM were down 16% this year compared with a 41% surge in the Philadelphia Semiconductor Index (read: Take a Bite of Apple's Blowout Earnings With Top-Ranked ETFs).
Market Impact
The news has led to rise of 3.7% in Qualcomm shares in pre-market trade at the time of writing while Broadcom is up 1.1%. The Bloomberg report propelled Qualcomm shares up as much as 19% on Friday, the biggest one-day move since October 2008 and made it the best performing stock on the S&P 500 index on Friday. The stock crushed its average daily volume figure as it exchanged about 81 million shares in hand compared with 9.2 million shares on average. Meanwhile, Broadcom shares rose about 5.5% on the day on elevated volumes of 12 million compared with the 2.8 million average.
Notably, QCOM has a market capitalization of $91 billion while AVGO has a market cap of $112 billion.
Given the expected deal, investors seeking to ride out the surging corner of the broad tech space in a diversified way could consider the following ETFs. Any of these funds could make for a compelling choice as most of these surged to new record highs following the news. The trend is likely to continue in the days ahead given their Zacks ETF Rank #1 (Strong Buy), suggesting their continued outperformance.
Moreover, these products gained more than 1% on the day following the Bloomberg report and outpaced the gain of 0.95% for the broad tech fund PowerShares QQQ (QQQ - Free Report) , which targets the Nasdaq-100 Index (see: all the Technology ETFs here).
This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms. Of these, QCOM and AVGO take the fourth and fifth positions in the basket with a combined 15.53% share. The fund has amassed $1.2 billion in its asset base and trades in solid average volume of around 478,000 shares a day. It charges 48 bps in fees a year from investors and gained 1.8% on the day.
This fund provides exposure to 26 securities by tracking the MVIS US Listed Semiconductor 25 Index. Qualcomm occupies the eight position in the basket while Broadcom takes the tenth spot with a combined 9.5% of assets. The product has managed assets worth $989.6 million and charges 36 bps in annual fees and expenses. It is heavily traded with a volume of around 3.2 million shares per day and has gained 1.1% following the Bloomberg report (read: Best ETFs & Stocks from October's Top Performing Sector).
This fund tracks the S&P Semiconductor Select Industry Index, a modified equal-weighted index. It holds 47 stocks in its portfolio with QCOM and AVGO accounting for nearly 3% share each. The ETF is less popular and illiquid with AUM of $344.1 million and average daily volume of 78,000 shares. It charges 35 bps in fees per year and was up 1.3% on the day.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Broadcom Launches Bid for Qualcomm: Semiconductor ETFs Surge
Another wave of mergers and acquisitions has lashed on the hot semiconductor space. This is especially true as communications’ chipmaker Broadcom (AVGO - Free Report) has make an unsolicited bid to acquire the smartphone chip supplier Qualcomm (QCOM - Free Report) for $70 per share or $130 billion, including debt. The news was first flashed on Bloomberg last week.
Under the terms of the bid, Broadcom would pay $60 per share in cash and $10 per share in Broadcom stock. This represents a 13% premium to Friday's closing price of $61.81.
By acquiring Qualcomm, Broadcom could become the third-largest chipmaker, behind Intel Corp. (INTC - Free Report) and Samsung Electronics. This is because the combination would mix Qualcomm’s dominance of chips that connect handsets to wireless networks with Broadcom’s expertise in chips that link devices to Wi-Fi networks (read: Here's What Investors Need to Know About Soaring Semiconductor ETFs).
The combination would represent the biggest technology acquisition in history, dwarfing Dell Inc.’s $67 billion buyout of EMC in 2015. In addition, Broadcom is also expected to acquire NXP Semiconductors (NXPI - Free Report) , which Qualcomm agreed to buy in 2016 for $38 billion. The takeover is yet to be completed due to an ongoing antitrust investigation.
The Broadcom-Qualcomm deal, if struck, would face heavy regulatory scrutiny given their sheer size, and heavy level of consolidation in the chip industry. The Bloomberg report came in a month when an ongoing legal battle with Apple (AAPL - Free Report) over wireless chip pricing, patents and alleged anticompetitive behavior has led to weak trading in Qualcomm’s stock. Before the report, shares of QCOM were down 16% this year compared with a 41% surge in the Philadelphia Semiconductor Index (read: Take a Bite of Apple's Blowout Earnings With Top-Ranked ETFs).
Market Impact
The news has led to rise of 3.7% in Qualcomm shares in pre-market trade at the time of writing while Broadcom is up 1.1%. The Bloomberg report propelled Qualcomm shares up as much as 19% on Friday, the biggest one-day move since October 2008 and made it the best performing stock on the S&P 500 index on Friday. The stock crushed its average daily volume figure as it exchanged about 81 million shares in hand compared with 9.2 million shares on average. Meanwhile, Broadcom shares rose about 5.5% on the day on elevated volumes of 12 million compared with the 2.8 million average.
Notably, QCOM has a market capitalization of $91 billion while AVGO has a market cap of $112 billion.
Given the expected deal, investors seeking to ride out the surging corner of the broad tech space in a diversified way could consider the following ETFs. Any of these funds could make for a compelling choice as most of these surged to new record highs following the news. The trend is likely to continue in the days ahead given their Zacks ETF Rank #1 (Strong Buy), suggesting their continued outperformance.
Moreover, these products gained more than 1% on the day following the Bloomberg report and outpaced the gain of 0.95% for the broad tech fund PowerShares QQQ (QQQ - Free Report) , which targets the Nasdaq-100 Index (see: all the Technology ETFs here).
iShares PHLX Semiconductor ETF (SOXX - Free Report)
This ETF follows the PHLX SOX Semiconductor Sector Index and offers exposure to 30 firms. Of these, QCOM and AVGO take the fourth and fifth positions in the basket with a combined 15.53% share. The fund has amassed $1.2 billion in its asset base and trades in solid average volume of around 478,000 shares a day. It charges 48 bps in fees a year from investors and gained 1.8% on the day.
VanEck Vectors Semiconductor ETF (SMH - Free Report)
This fund provides exposure to 26 securities by tracking the MVIS US Listed Semiconductor 25 Index. Qualcomm occupies the eight position in the basket while Broadcom takes the tenth spot with a combined 9.5% of assets. The product has managed assets worth $989.6 million and charges 36 bps in annual fees and expenses. It is heavily traded with a volume of around 3.2 million shares per day and has gained 1.1% following the Bloomberg report (read: Best ETFs & Stocks from October's Top Performing Sector).
SPDR S&P Semiconductor ETF (XSD - Free Report)
This fund tracks the S&P Semiconductor Select Industry Index, a modified equal-weighted index. It holds 47 stocks in its portfolio with QCOM and AVGO accounting for nearly 3% share each. The ETF is less popular and illiquid with AUM of $344.1 million and average daily volume of 78,000 shares. It charges 35 bps in fees per year and was up 1.3% on the day.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>