Is LSI Really A Screaming Buy? (LSI, STX, MRVL)

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LSI Corporation (NYSE: LSI) would probably be doing better this morning if the markets were indicated better.  A report from Barron’s over the weekend called “The Little Chip Maker That Could” has the call that LSI shares could rise another 50% from the current share price.  If so, then the shares could be seeing $12 or so ahead.  While we would normally question an article about chasing gains endlessly, it is pretty hard to not notice that the Thomson Reuters consensus target on this issues is already $11.67.

The drive behind Barron’s high-stakes call for a 50% gain depends upon endless demand ahead for more storage and more networking capacity.  LSI designs chips and software for hard drives and flash drives and the recent pop from Seagate Technology PLC (NASDAQ: STX) only adds more focus here.  We would caution that most of that good news should have been anticipated in the latter part of 2011 and the start of 2012 as the shares have risen so much, but we were ahead of the catch-up game on Wall Street.

Investors should note that LSI shares are already up about 30% this year.  The article cites other issues such as higher margins, above-market earnings growth ahead, a strong balance sheet, capital discipline, a streamlined operation, and other issues.  While the article noted stiffer competition from Marvell Technology Group Ltd. (NASDAQ: MRVL) it also noted that Marvell was hit harder by the Thai flooding.

LSI is up 2.5% at $8.13 in early trading this Monday morning against a 52-week trading range of $4.75 to $9.20.

JON C. OGG

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