Why Broadcom Shares Got Bonked

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of communications chip maker Broadcom (NASDAQ: BRCM  ) sank 15% today after its quarterly results and guidance disappointed Wall Street.

So what: Broadcom's second-quarter adjusted EPS managed to top estimates, but a slight miss on the top line -- revenue of $2.09 billion versus the consensus of $2.11 billion -- coupled with downbeat guidance for the current quarter is triggering worries over slowing growth. Specifically, analysts cited uncertainty over the company's product transition, increasing competition, and overall weakening demand for smartphones as reasons to be concerned, giving short-term-oriented traders little reason to stick around.  

Now what: Management now sees third-quarter revenue in the range of $2.05 billion to $2.2 billion, below the average analyst estimate of $2.25 billion, but expects its market share to remain in good shape for the rest of the year. "Looking forward, we see continued growth driven by our industry leading portfolio of wired and wireless communication platforms," said CEO Scott McGregor in a statement. More important, with the stock hitting a new 52-week low today and trading at a paltry forward P/E of 8, now might be an opportune time to buy into that long-term bullishness.

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