Chipmaker Microsemi Corp. (MSCC) earned an upgrade from Goldman Sachs & Co. in part because of a positive sales outlook and its low stock price. However, Goldman's Mark Delaney also raised Microsemi to a buy because of the likelihood that the company could be a target for an acquisition.

Microsemi makes chips for aerospace, defense, communications, data center and industrial customers. Shares of the company gained 1.2% to $47.89 on Thursday, a day after the report. Goldman has a $55 per share target, based on a mix of comparison to peer valuations and M&A likelihood.

The government and other markets could help Microsemi. "The 2018 U.S. defense budget proposal targets a 10% [year-over-year] spending hike," Delaney wrote. The company has also reported strong sales from satellite companies and overseas militaries.

The Aliso Viejo, Calif., company could win server and storage controller business associated with Intel Corp.'s (INTC) - Get Report new Purley processors, the analyst suggested.

While the outlook has arguably picked up, Microsemi trades at a discount to its peers. Analog Devices Inc. (ADI) - Get Report Broadcom Ltd. (AVGO) - Get Report and Texas Instruments Inc. (TXN) - Get Report trade at 5.4 times, 5.8 times and 5.4 times Goldman's projected calendar-year 2017 sales, which chipmakers have a median multiple of 5.4 times 2017 sales.

Microsemi trades at 4 times 2017 sales, a 25% discount to the group, which could make it an attractive target.

The company explored sales opportunities last Fall, Bloomberg reported, after receiving interest from Skyworks Solutions Inc. (SWKS) - Get Report .

Microsemi's $5.5 billion market cap, and its $6.5 billion enterprise value including debt, make it a modestly sized target for the semiconductor industry.

Last year saw blockbuster chip deals. Avago Technologies Ltd. closed its $37 billion purchase of Broadcom and then took the target's name; Softbank Group Corp. bought ARM Holdings plc for $32 billion; and Western Digital with Sandisk for $19 billion.

Qualcomm Inc. (QCOM) - Get Report is trying to close the $47 billion purchase of NXP Semiconductors NV (NXPI) - Get Report .

Microsemi did not immediately respond to a query.

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