|Written by GSCR Staff|
|Thursday, 27 June 2013 09:57|
We hope The Goldman Guide earlier this week grabbed your attention. While conjuring up images of Meg Ryan faking it in the NY deli hopefully got some laughs, our intention was to elaborate on our hypothesis that we believe the market is in a correction phase, but will bounce back in a huge way later on this year. For now, it is time to trade the old reliable sectors and stocks making headlines in our small cap space.
PLX Technology, Inc. (NASDAQ – PLXT - $4.74) looks like an attractive, inexpensive, and relatively undervalued technology play for a short term trade. A quick glance at technical analysis caught our attention, as this stock is one of the few operating in the ‘very bullish’ outlook for the next 30 days. Additionally, the option contracts for July and September indicate a strong bias toward the bulls in relation to put/call ratio.
PLX offers products in the PCI switch, PCI bridge, and UBS interface chips. The company is a leader in PCI Express products, which are silicon and software connectivity solutions enabling emerging data center architectures. The company continues to innovate and release new products. Earlier this month the company announced the production of the new PLX® ExpressLane™ PEX8748 PCIe Gen3 switch that will provide high performance connectivity support for the new Advantech high-definition video platform. This product will enable the ultra high transfer speed for broadcasting, content creation, cinema projection, video conferencing, and other uses that require raw processing power for high-performance video.
PLX has a forward P/E of just under 11, based on estimates that the company will get into the black from an EPS perspective this year with $0.28 forecast for 2013 and $0.44 for 2014. The company also is solid based on gross and operating margins. PLXT’s gross margin is 59%, which is in line for the small cap semi space, but the operating margin of 6% is outstanding given that a lot of small cap semiconductors are actually near or below 0 for this metric.
A covered call strategy may be a good idea for traders, with some attractive prices on options, especially the Septembers. We like the target of $6.25 over the next month or two.
Have a great day.
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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