LSI Corporation (NYSE: LSI) designs, develops and markets semiconductors used by original equipment manufacturers in the data networking and consumer electronics markets. It also provides a wide variety of storage systems, sub-assemblies, and storage management software applications. Top clients include Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM) and Sony (NYSE: SNE).

The firm surprised the Street last week, when it reported Q1 EPS of ten cents and revenues of $660.75 million. Analysts had been looking for seven cents and $636 million. Management also guided Q2 EPS to 8-12 cents (seven cent consensus) and Q2 revenues to $650-$680 million ($634.62M consensus). Kaufman Brothers and Caris subsequently declared the stock a "buy". Friedman Billings and Deutsche Securities called it a "hold". All four firms upped their price targets from the range $4.50-$6.00 to the range $6.50-$7.00.

LSI shares popped on the news and are now forming a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys", two "buys", ten "holds" and one "sell". Analysts estimate a 24% average annual growth rate, through the next five years. The LSI Price to Sales ratio (1.41), Price to Book ratio (1.73), Price to Free Cash Flow ratio (18.17) and Sales Growth rate (25.00%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 90% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past fifty-two weeks, it has traded between $3.75 and $9.08. A stop-loss of $5.25 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He holds a position in LSI, but not in the other issues mentioned.