At first glance, Sigma Designs (NASDAQ:SIGM) doesn't offer a lot of what I like to see in semiconductor stocks. The company's biggest market, TVs (smart TVs in this case), is notorious for short product cycles and relentless price pressure, and the company's opportunities in Internet of Things (or IoT) may be limited by stiff competition. On top of all of that, Sigma has never really distinguished itself with good organic revenue growth, strong margins or healthy cash flows.
All of that said, there could still be some appeal here for more aggressive investors. The smart TV business is poised to grow well for now and the IoT business should be about to re-accelerate. What's more, Sigma Designs looks like the sort of semiconductor company that would offer a lot of earnings accretion to a strategic buyer, provided that the company's CEO and founder wouldn't stand in the way of such a deal.
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Despite Tough Markets And Stiff Competition, Sigma Designs Could Offer Some Value