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FTXL - Broadcom Acquires VMware - Make Money Out Of It! Part 2
First Trust Nasdaq Semiconductor ETF
Buying VMW today is equivalent to buying AVGO at the free cash flow yield of 8.5% provided the merger gets closed.
It is an attractive valuation on both a historic and absolute basis. When a similar valuation was available last time, AVGO generated a 33% return over the next year.
Broadcom is likely to quickly deleverage within one year of closing the acquisition and be ready for further inorganic growth.
With half of the revenue from software, Broadcom is expected to deserve higher multiples.