Trade Of The Week

Broadcom (AVGO) Bulls Pile Up as Shares Consolidate

Date: October 18, 2017

Broadcom (AVGO) shares have been consolidating on the weekly timeframe since late May, a highly-coiled name in a strong trend with massive bullish open interest. AVGO has a potentially explosive move out of this range up to $290-$300. AVGO has recently seen big buyers in the December $270 calls, over 13,000X, as well as the January $280 calls with more than 9,000 bought and November $260 calls with 13,000+ bought. AVGO has large put sales and call buys across every month in expiration and full look at the $1M+ positions from the OptionsHawk database is below.


The $99.86B semiconductor trades 13.85X earnings, 5.9X sales, and 18.3X cash with a 1.67% yield and double-digit earnings growth. AVGO is targeting high-single digit revenue growth in 2018 and 2019 and continues to benefit from overall growth trends in the industry with SIA recently noting the thirteenth consecutive month of global semiconductor growth. Last week, Gartner raised their FY semiconductor forecast for the fifth time to 19.7% Y/Y. AVGO reported sales growth across all their business segments last quarter with their lower-growth but more stable wired business up 7%, wireless up 27% with more tailwinds from the new Apple iPhone cycle, and industrial rising 18%. AVGO reached a deal to broaden their storage business last year with a $5.9B deal for Brocade which has faced numerous delays but expected to close this Fall.


Analysts have an average target for shares of $278 with most the Street at a Buy equivalent and short interest minimal at 1.2%. JPM positive on 9/12 noting that their recent checks showed a 40% increase in blended content for the new models of iPhone and concerns about production issues or lackluster demand are overblown. Canaccord has a $300 PT seeing a Super Cycle in upgrades with pent-up demand. They think 250M units sold in calendar 2018 is possible which will be a big tailwind to AVGO. Bernstein was positive on 10/10 noting that the company is growing organically by mid-double digits, faster than the overall industry and the focus on M&A has overshadowed a very strong business. They have a $285 PT for shares.


Events to Watch: Earnings Expected Around 12/7, Broadband World Forum (10/24), Brocade/Broadcom Merger Close Deadline (11/1)


Trade to Consider: Long the AVGO December $270 Calls for $3.50 or Better



Previous Trades of the Week:

Broadcom (AVGO) Bulls (10/18/17)

Activision Bulls (ATVI) (10/7/17)

Steel Dynamics (STLD) Bulls (9/27/17)

KKR Bulls (9/18/17)

Mellanox (MLNX) Bulls (8/22/17) 

Using the OptionsHawk Database (8/1/17)

Summit (SUM) Bulls Position for Infrastructure Upside (7/20/17)

S&P Global (SPGI) Bulls Build into Technical Strength (7/13/17)

Nektar (NKTR) Bulls Position in Relative Strength Biotech (7/4/17)

Lamb Weston (LW) Bulls (6/23/17)

Blackstone (BX) Spreads Position for Summer Rally (5-22-17)

Moody’s (MCO) Call Buyer Holds for Key Technical Breakout (4-3-17)

Unusual Cott Corp (COT) Bulls Position for Summer Rebound (3-13-17)

J2 Global (JCOM) Bullish OI (3-7-17)

Constellation (STZ) Bullish Spreads Position for Rebound in 2017 (2-28-17)

Cardtronics (CATM) Short Puts Look for Recent Lows to Hold (2-20-17)

T-Mobile (TMUS) Call Spreads Position for Strong 1H (2-13-17)

Pinnacle Foods (PF) Bulls Sit in Open Interest Amid Technical Strength (1-31-17)

Scientific Games (SGMS) Bulls Look for Continued Strength in Small-Cap (1-23-17)

Zayo Group (ZAYO) Open Interest Positioned Bullish into Recent Pullback (1-16-17)

Honeywell (HON) Bulls Position for Technical Strength, Potential M&A in 2017 (1-9-17)

Mylan (MYL) Bulls Position for 2017 Turnaround (1-2-17)

Adobe (ADBE) Bulls Buy into 200-MA (12-5-17)

Oceaneering (OII) Put Sales See Floor in Energy Stock (11-21-16)

Intel (INTC) Bulls (11-14-16)

Mobileye (MBLY) Bulls (11-7-16)

Sherwin Williams (SHW) Bulls (10-31-16)

Palo Alto Networks (PANW) Call Spreads (10-24-16)

Post Holdings (POST) Bulls (10-17-16)

Marathon Petrol (MPC) Sell-Off Attracts Long-Term Bull (10-10-16)

Teva (TEVA) Bulls Building Contrarian Positions (10-3-16)

Biogen (BIIB) Bulls (9-19-16)

Prudential (PRU) Bulls (9-12-16)

Lionsgate (LGF) Bulls (9-5-16)

Google (GOOGL) Call Spreads (8-29-16)

Anadarko (APC) Bulls (8-15-16)

CIT Group (CIT) Bull Spreads (8-1-16)

Ball Corp (BLL) Bull Spreads (7-25-16)

Imperva (IMPV) Bulls (7-18-16)

Chipotle Mexican Grill (CMG) 3 Way Spreads (7-11-16)

WhiteWave (WWAV) Bulls Position for Summer Rally (6-27-26)

Amazon (AMZN) Call Fly (6-20-16)

BP PLC (BP) Bulls (6-13-16)

Visa (V) Bulls (5-30-16)

ActiVision (ATVI) Calls (5-23-16)

Eagle Pharma (EGRX) Calls (5-16-16)

ACADIA (ACAD) Bullish Spread (5-9-16)

Kate Spade (KATE) Call Spread (5-2-16)

WestRock (WRK) Calls (4-26-16)

Shire (SHPG) Risk Reversals (3-21-16)

PACCAR (PCAR) Puts (3-7-16)

Goldman Sachs (GS) Bull Put Spreads (2-29-16)

SS&C Tech (SSNC) Call Spreads (2-22-16)

Mead Johnson (MJN) Call Buying (2-15-16)

Lyondell (LYB) Puts (2-8-16)

MicroChip Puts (1-26-16)

Wal-Mart (WMT) Calls (1-18-15)

CenterPoint Enegy (CNP) Calls (1-11-16)

Sarepta (SRPT) Bulls (12-21-15)

UPS Call Spread (12-14-15)

Ross Stores (ROST) Puts (11-9-15)

Baxter (BAX) Bullish Positioning (11-2-15)

Comerica (CMA) Call Options (10-29-15)

Allergan (AGN) Bullish Positioning (10-19-15)

Starz (STRZA) Covered Risk Reversals (9-28-15)

Nu-Skin (NUS) Put Spreads (9-21-15)

Edgewell Personal Care Calls (9-13-15)

Vodafone (VOD) Risk Reversals (9-7-15)

Incyte (INCY) Call Spreads (8-31-15)

AutoDesk (ADSK) Risk Reversals (8-17-15)

McDonald’s (MCD) Call Spreads (8-10-15)

Macy’s (M) Risk Reversal (8-3-15)

Assured Guaranty Call Spreads (7-27-15)

Aer-Cap Call Buyers (7-20-15)

Workday (WDAY) December Call Spreads (7-13-15)

Halozyme Volatility Spread (1-18-13)

National Oilwell Varco (NOV) 3 Way Bull Spread (1-11-13)

Leverage Spread Positions for AIG (AIG) Rally (1-4-13)

China (FXI) Bulls Position for Rally (10-10-12)

Intel (INTC) Mixed Action into Earnings (7-6-12)

WellPoint (WLP) Bullish Calendar Spread (5-31-12)

Medivation (MDVN) Calendar Spread (4-10-12)

Tivo (TIVO) Bullish Spreads (3-28-12)

Gold Corp (GG) Call Fly Spread (3-15-12)

Trip Advisor (TRIP) Strangle Sale (3-1-12)

DirecTV (DTV) January 2013 3 Way Bullish Spread (2-21-12)

Dick’s Sporting Goods (DKS) Bear Put Spreads (2-16-12)

Vale SA (VALE) Bullish Risk Reversal (2-9-12)

Ford (F) Bullish Straddle Sale, Call Buy (2-3-12)

Kodiak Oil & Gas (KOG) January 2013 Call Spread (January 26th, 2012)

US Steel (X) April Covered Bullish Ratio Risk Reversal (January 20th, 2012)

Treasury (TLT) March 117/113/109 Butterfly Put Spread (January 13th, 2012)

Oracle (ORCL) Ratio Call Spread 2X3 (January 6th, 2012)

Yahoo (YHOO) February $16/$19 Ratio Call Spread, December 23, 2011

EBAY Ratio Call 2X3 Spread, December 2, 2011