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 late last month, when it reported Q2 EPS of 13 cents and revenues of $692 million. Analysts had been looking for nine cents and $665.5 million. Management also guided Q3 EPS to 11-15 cents (11 cent consensus) and Q3 revenues to $695-$725 million ($693.41M consensus). The CEO noted that the company had recently secured silicon design wins with top-tier hard drive and server makers.
LSI shares popped on the news and are now forming a bullish "flag" consolidation pattern. Prices frequently exit flags 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", eight "holds" and three "underperforms". Analysts estimate a 19% average annual growth rate, through the next five years. The LSI Price to Sales ratio (1.54), Price to Book ratio (1.88), Price to Free Cash Flow ratio (23.01) and EPS Growth rate (-0.05 to +0.13 yr/yr) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 81% 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 $7.80. A stop-loss of $6.05 looks good here.