Despite Tough Markets And Stiff Competition, Sigma Designs Could Offer Some Value

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

Lofty Expectations Could Be CEVA's Biggest Threat

It hasn't always been easy for CEVA (NASDAQ:CEVA). While the quality of this IP licensor's DSP technology has never been seriously questioned, the fact remains that Qualcomm (NASDAQ:QCOM) is a major competitive force in mobile baseband, and CEVA has seen significant volatility in recent years in its reported results as mobile partners have come under pressure or exited the industry entirely. Sentiment has definitely shifted, though, as the Street has come around to the significant revenue growth and margin leverage potential as the company's licensees gain share with much more lucrative LTE products and as the IoT market matures.

With the shares up about 75% over the past year, I would argue CEVA's valuation now incorporates a lot of the potential that was ignored just a year ago. A baked-in 16% long-term FCF growth rate isn't ridiculous or impossible, but it isn't what I would call "undemanding".

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Lofty Expectations Could Be CEVA's Biggest Threat

Seeking Alpha: Unable To Find A Foothold, Marvell Keeps Sliding

One of the things I notice in the bullish arguments for Marvell (NASDAQ:MRVL) is that there's a lot of talk about the company's "strong IP" and the likelihood that an appeals court will overturn a $1 billion-plus patent judgment against the company. The trouble with that is that Marvell hasn't given anybody particularly strong reasons lately to believe that they can translate IP into sustainable market share and the patent judgment reversal (if that indeed happens) is a one-time event.

As is, it's hard to find a strong argument to buy and hold Marvell for its turnaround qualities. The storage business seems to be incapable of supporting sustained growth, and I think the company's Quixotic quest to remain a player in mobile is bleeding away value. Last and not least, I see no particular signs that networking chip companies like Broadcom (NASDAQ:BRCM) and Cavium (NASDAQ:CAVM) are, or should be, worried about Marvell's efforts in this market.

I do believe that ditching the mobile business could add $1.50/share in value relatively quickly and a substantial reduction in the patent award could add another $2/share. Those two events would be worth around a 20% return, but neither are certain. What's more, absent a better vision from management regarding what Marvell does (and does not) actually do well, it's hard to regard this as more than a trading candidate.

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Unable To Find A Foothold, Marvell Keeps Sliding

Seeking Alpha: Better Priorities Leading To Better Outcomes For Broadcom

Broadcom (NASDAQ:BRCM) has had to learn some hard lessons about growth for growth's sake. Chasing revenue growth for its own sake led the company to two sizable ill-fated (and overpriced) acquisitions, not to mention the fruitless investment of substantial monetary resources into the uncompetitive broadband business.

Chastened by its failures, Broadcom management has retrenched around its established strengths and reprioritized profitable growth. Lost, or at least obscured, in the fuss over baseband and the lingering concerns about wireless connectivity is a very strong business in switching and broadband, not to mention upside from IoT-oriented connectivity products. Broadcom isn't obviously cheap from a FCF perspective, but if Broadcom can deliver the margin improvements its management projects and if the company can stick to a Texas Instruments-like (NASDAQ:TXN) transformation, there could be long-term upside beyond $50.

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Better Priorities Leading To Better Outcomes For Broadcom

Seeking Alpha: Marvell Moving On Mobile

In the relatively short time since I last wrote on Marvell Technology (MRVL), the company's shares have done all right - rising about 3% and keeping pace with the SOX Index while modestly outperforming Qualcomm (QCOM) and Broadcom (BRCM). I continue to have my concerns about the company's long-term positioning in mobile/wireless, but the shares don't seem all that expensive in a semiconductor sector that doesn't have too many bargains. What's more, if the company gets a few breaks going its way (including holding off rivals like MediaTek and Spreadtrum in China), there could be some worthwhile upside to my assumptions.

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Marvell Moving On Mobile

Seeking Alpha: Marvell Shares May Not Be Done Yet

The last few months have been kind to many chip stocks, with Maxim (MXIM), Marvell (MRVL), and Nvidia (NVDA) all logging double-digit returns. Marvell's run actually goes quite a bit further back, as the shares have more than doubled from their late 2012 lows. As Marvell has grown share in the hard drive controller space and announced LTE wins in China, investors have returned to the shares despite worries about a looming patent infringement award and the prospects of competing with Qualcomm (QCOM).

The sell-side seems to be getting more cautious about suppliers to the high-end smartphone market, but that's not really Marvell's core market. Although I own and prefer Broadcom (BRCM), Marvell may be undervalued enough to be worth a closer look even after this long run. Most chip stocks are bought to be sold, though, so investors shouldn't assume that this is a buy-and-forget opportunity.

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Marvell Shares May Not Be Done Yet

The Motley Fool: Modest Expectations Still Working in Broadcom Corporation's Favor

Owning a stock market darling is a blast, but sometimes you have to turn to the ugly ducklings to find value. Such is the case with Broadcom (NASDAQ: BRCM  ) , where the market seems certain that the company can't win much baseband, can't keep its connectivity business, and doesn't deserve to be owned on the basis of its strength in networking or broadband. It is up to Broadcom management to prove that the market is too skeptical, but investors who own Broadcom today should be in position to benefit from stronger results later this year.

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Modest Expectations Still Working in Broadcom Corporation's Favor

Investopedia: So Long, Spreadtrum

Spreadtrum's (Nasdaq:SPRD) time as a publicly-traded semiconductor company wasn't all that long, and it certainly wasn't always easy, but it looks like it's coming to a happy conclusion for shareholders. Speadtrum announced Friday morning that it had accepted an improved bid from Tsinghua Unigroup and agreed to sell itself for $31 per share in cash.

A Fair Bid...
Not only was Tsinghua's final bid about 10% better than its initial bid, but it represents a takeout price above the company's prior all-time high in late 2011. Spreadtrum is selling itself for about 14 times its trailing EBITDA, only a very slight discount to the mid-teens average of well-known mobile chip companies like Avago (Nasdaq:AVGO), Broadcom (Nasdaq:BRCM), and Qualcomm (Nasdaq:QCOM). Moreover, relative to the company's cash flow growth potential, this was a very reasonable price for the stock.

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Investopedia: Broadcom Has To Play Offense And Defense

Once a darling of the floundering chip space, smartphone chip stocks have had a rather rough time of it over the past year or so. Avago (Nasdaq:AVGO), Skyworks (Nasdaq:SWKS), Qualcomm (Nasdaq:QCOM), and Broadcom (Nasdaq:BRCM) have all notably lagged the market over the past year. While it's true that these one-time market-beaters may have overshot the mark and been due for a retrenchment, investors have nevertheless been worried about the pace of high-end smartphone demand and the risk of increased price-based competition from Asian suppliers.

Though I'd be very careful about simply plugging my ears and ignoring the threats to Broadcom's business, this stock continues to look like a solid name for the long term. That said, with the stock close to a 52-week high, the potential here isn't quite what it once was.

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