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LSI Corp. (NASDAQ:LSI) should see solid growth for the next few years. Barron's says analysts underestimate the firm's earning potential, and shares could rise more than 50% in a year.

The firm's growth will come from 'system-on-a-chip' combination devices for hard drives and high-performance communications chips. Deliveries of these chips to just a handful of major customers could boost revenue by almost 20%, which isn't yet reflected in some analysts' estimates.

Once viewed as a cyclical play going nowhere, LSI hired CEO Abhijit Talwalkar in 2005 and he has refocused LSI on enterprise clients, investing heavily in networking and storage and completing two acquisitions. Talwalkar shed several divisions and outsourced production, and the company's design-win conversion rate has soared to 90% from 30%. After paying off some debt, LSI still has $525M in cash.

LSI trades at 1.5 times sales. With a recent close of $4.56, shares have bounced back from March's $2.39 bottom but are still well below the $11-range the shares fetched in 2006, not to mention the $90+ of nearly a decade ago.

Talwalkar says "we are very confident of growing, irrespective of what the economy looks like. We have a deep pipeline of committed customers" and plenty of upside potential.

  • Kevin Rendino, of BlackRock Basic Value Fund, says the stock is worth $7.50.

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  • LSI was ranked as one of the top ten most attractive tech stocks in the S&P 500 according to valuation attractiveness.
  • LSI: Q1 EPS of -$0.03 beats by $0.01. Revenue of $482M vs. $469M. (PR)
Source: LSI Is Ready to Rise - Barron's

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