Buy This Fast Growing, Misvalued Tech Stock Now!
The Dynamic Wealth Report
April 29, 2010
by Robert Morris, Editor
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.
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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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Market Vectors Gold Miners ETF (GDX) has been moving
higher in a steady uptrend for nearly three months. The ETF is up more
than 25% from the February low. Rising gold prices and strong earnings
from the gold miners are driving GDX higher.
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