|Written by GSCR Staff|
|Wednesday, 22 April 2015 05:34|
In Monday’s Goldman Guide we discussed some changes that are coming which we believe will help our readers advance their satellite portfolios and reach, new ‘highs’. Alright, the pun related to cannabis stocks was too easy.
One thing that will not change in our small cap world any time soon is that technology is a major sector. While a great deal of these stocks are start-ups, many of the companies we highlight are very established and are crucial pieces of the supply chain to larger mega caps. Revenue growth and stock appreciation usually has a trickle-down effect.
Google Inc. (NASDAQ – GOOGL - $542.92) is one of those stocks Wall Street uses to gauge the overall technology sector. The Company reports quarterly financial results Thursday. Look for a tech pop if results are good.
If we look deeper into technology, specifically into the semiconductor space, there is one mega player that is a terrific proxy, Intel Corporation (NASDAQ – INTC - $32.43). The Company announced its quarterly results on Monday which were mostly favorable. A vast number of tech stocks got a great bounce because of this. Below is a one year chart for INTC which illustrates the stock is trading above the 50-day EMA and could be entering another accumulation run.
INTC 1-Year Chart – 50-Day EMA
We believe the semiconductor industry will continue to grow. We found an old play to capitalize on this. Lattice Semiconductor Corporation (NASDAQ – LSCC - $6.38) was a 30-30 pick back in February 2014 at $7.77. The stock reached $8.73 in April 2014 before a slow descent to current levels.
The Company is a downstream producer in the space and is a global leader in smart connectivity solutions, providing market leading intellectual property and low-power, small form-factor devices that enable more than 8,000 global customers to quickly deliver innovative and differentiated cost and power efficient products. The Company’s broad end-market exposure extends from consumer electronics to industrial equipment, communications infrastructure and licensing.
First, Lattice Semiconductor looks attractive from a growth perspective. The 5-year PEG ratio is a low 1.1%. Revenue growth is forecast by consensus analysts’ estimates at a CAGR over 5% over 2014 for FY15 and FY16. Another item we have been real keen on recently is debt. The Company has none of it on a long term basis as of January 3, 2015. An Enterprise Value/EBITDA value under 8 makes it an attractive acquisition target for a larger firm as well. Finally, a short float under 4% is a great indication of little dissent for the stock.
The Company reports FY15Q1 financial results on May 4th. Look for good results to give LSCC a pop. We think the stock rides the momentum wave as investors put their ‘chips’ into technology as the year progresses. Look for LSCC to reach the $8 level by Q4 of this year.
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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