Buy This Fast Growing, Misvalued Tech Stock Now!

| April 29, 2010 | 0 Comments

For decades, we’ve been at the mercy of television and cable networks.  They decided what content to show and when to show it.  We’ve been forced to plan our lives around their broadcasting schedules.

That’s all about to change.

Thanks to a little known technology called Internet Protocol Television or IPTV for short.  IPTV is essentially digital television provided over the internet.  It’s fast replacing the traditional television delivery systems such as radio frequency (RF) broadcast, satellite, and cable (CATV).

With IPTV, you decide what you want to watch and when.  It’s truly video on demand.  You can watch primetime TV shows anytime you want.  You can view premium content like movies, sporting events, or concerts at the click of a button.

But, can’t we already do that with video on demand from our cable or satellite television provider you ask?

Yes we can.  However, with IPTV, we’ll have a nearly infinite amount of content to choose from.

You see, current networks use broadcast video technology which sends a steady stream of content to the customer.  The customer can only select from as many choices as the provider can stuff into the pipe flowing into the home.

IPTV works differently.

The content remains in the network.  Only the content selected by the customer is sent to the customer’s home.  This frees up bandwidth.  And the customer’s choice is no longer limited by the size of the pipe into the home.

With IPTV, you can still watch live events and recorded programming at their scheduled times.  And, IPTV will one day be the platform for truly interactive television.

Best of all, the quality of service is the same or better than your current service.  (It’s not like the herky-jerky streaming video you get through the internet.)

The IPTV market is entering a new era of growth explosion.

Last year, about 28 million people worldwide subscribed to IPTV services.  That number is expected to skyrocket to 83 million subscribers by 2013.

So, how do we make money from this trend?

That’s easy.

Every IPTV subscriber has to have a certain piece of equipment… an IPTV set-top box.  The IPTV set top box is a small computer that decodes digital audio and video signals.  It then presents the signals as content on your TV screen.

More importantly, inside every IPTV set-top box is a digital media processor and a home network chipset.

The processor decodes the digital audio and video signal.  And, the home network chipset enables the transfer of internet protocol content over coaxial cables, phone lines, and power lines.

The leading manufacturer of digital media processors and home network chipsets used inside IPTV set top boxes is… Sigma Designs (SIGM).

The company’s technology is used in IPTV set top boxes made by the leading manufacturers in the industry.  Tech heavyweights like Cisco Systems (CSCO) and Motorola (MOT).

SIGM had a difficult time in 2009 due to the global recession. However, the company began recovering in a big way during the fourth quarter.

Just take a look at the numbers compared to the third quarter’s figures.

Revenue surged 92% to $68.1 million.  (Year over year, revenue jumped 44%.)  Excluding non-recurring expenses, net income soared 303% to $11.3 million or $0.37 per share.

And this is just the beginning.

SIGM’s CEO recently said, “We believe that the [IPTV] market is moving into a new growth phase…”  Moreover, global IPTV set top box sales are expected to increase at a 25% compound annual growth rate through 2014.

For 2010, IPTV set top box sales are forecast to jump 48%!

Given the industry upturn, analysts are expecting strong growth at SIGM.  They’re forecasting revenue gains of 28% to $264 million. And, the consensus earnings estimate is $1.03… that’s nearly a 16% increase over last year.

Despite this great outlook, SIGM shares are badly misvalued by the market.

At a recent price of $12.32, the shares are trading at just 12x the consensus estimate.  That’s a low P/E for a company expected to grow earnings 20% a year for the next five years.

I think the shares are headed significantly higher from here.

Right now the stock’s flying under the radar of most investors.  As the company delivers on the optimistic forecasts, more investors will pile into the stock.  I wouldn’t be surprised to see SIGM hit $20 per share in the next 12 months.

Take a look at SIGM for your own portfolio.  This is one of the rare fast growing technology stocks still misvalued by the market.

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Category: Stocks

About the Author ()

Robert Morris is the editor of Penny Stock All-Stars, an investment advisory focused on discovering small-cap and micro-cap stocks that are destined to become the market’s next Blue Chips. The Wall Street veteran and small-cap stock specialist is also a regular contributor to Penny Stock Research. Every week, Robert shares his thoughts with our readers on a variety of penny stock-related topics. In addition to Penny Stock Research, Robert also writes frequently for two other free financial e-letters, ETF Trading Research and the Dynamic Wealth Report. He’s also the editor of two highly successful and popular investment advisories, Biotech SuperTrader and China Stock Insider.

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