10 Technology Stocks With Upside

NEW YORK (TheStreet) -- Cirrus Logic (CRUS), Magma Design Automation (LAVA), Amtech Systems (ASYS), Atmel Corp (ATML), Spreadtrum Communications (SPRD), Westell Technologies (WSTL), AXT Inc (AXTI), MIPS Technologies (MIPS), Magic Software (MGIC) and UniTek Global Services (UNTK) are 10 technology stocks expected to return up to 115%, based on their respective 12-month price targets.

During the past one year, these stocks have recorded exponential gains outperforming both their peers and the S&P 500. The stocks have gained anywhere between 100%-300% and are expected to have further upsides, according to analysts. Moreover, most of these stocks are trading at single-digit PEs much lower than the S&P 500 which is trading at a PE of 15.35.
10. Cirrus Logic is a premier supplier of high-precision analog and digital signal processing components for audio and energy markets. It develops ICs, board-level modules and hybrids for high-power amplifier applications branded as the Apex Precision Power line of products. The stock has gained 164% during the past one year.

During the third quarter ended Dec. 2010, total revenue increased 46.7% year-over-year to $95.6 million. Gross margin improved 132 basis points to 54.86%, while operating margin expanded 744 basis points to 24.17%. Subsequently, net income more than doubled to $24.6 million or 34 cents per share compared to $11.1 million or 17 cents per share a year ago. Analysts estimated earnings of 33 cents per share.

Going forward, the company expects to record revenue of $88-$94 million during the fourth quarter. This would represent an increase of 40%-50% year-over-year. Furthermore, gross margin is estimated to range between 54-56%.

Of the six analysts covering the stock, 50% recommend it a buy, while 33% rate it a hold. There is one sell rating on the stock. On average, analysts expect an upside of 37% to $28 in value from current levels.

9. Magma Design Automation provides electronic design automation (EDA) software products and related services. Its software enables chip designers to reduce the time it takes to design and produce integrated circuits used in the communications, computing, consumer electronics, networking and semiconductor industries.

During the third quarter ended Jan. 2011, total revenue increased 12.3% to $34.8 million from $31 million, driven by a 35.5% increase in license revenue. The company added 14 new customer logos during the third quarter, including four new users of SiliconSmart ACE, Magma's library characterization product.

Non-GAAP net income stood at $5.4 million or 8 cents per share as opposed to $2 million or 4 cents per share in the year-ago quarter. Analysts estimated earnings of 7 cents per share. Going ahead, the company estimates fourth quarter revenue of $35-$35.5 million, while non-GAAP EPS is forecasted in the range of 7-8 cents.

Of the four analysts covering the stock, 75% recommend it a buy, while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts expect an upside of 39% to $8.7 in value from current levels.

8. Amtech Systems through its wholly owned subsidiaries, supplies horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. The company provides products and services to two industries: the solar industry and the semiconductor industry.

During the third quarter ended Dec. 2010, the company reported a surge in total revenue to $53.7 million from $15.5 million in the year-ago quarter primarily due to significantly higher shipments of its equipment to the solar industry. Order backlog as of Dec. 2010 and 2009 was $172.9 million and $74.4 million, respectively. Of the $172.9 million, approximately $162.0 million of orders came from its solar industry customers. Moreover, new orders booked increased more than 130% to $137.0 million compared to $59.4 million in the quarter ended Dec. 2009.

Net income grew several times to $5 million or 52 cents per share as against $80,000 or 1 cent per share a year ago. The company exceeded analyst expectations of 37 cents per share.

Of the five analysts covering the stock, 80% recommend it a buy, while the remaining rate a hold. There are no sell ratings on the stock. On average, analysts expect an upside of 39% to $31.9 in value from current levels.

7. Atmel Corp designs, develops, manufactures and sells a range of semiconductor IC products and touch solutions. Its products consist primarily of microcontrollers, advanced logic, mixed-signal, nonvolatile memory, radio frequency (RF) and system-level integration semiconductor solutions., and it operates in four segments, namely Microcontrollers, Nonvolatile Memories, RF and Application specific integrated circuit (ASIC).

During the fiscal year ended Dec. 2010, total revenue increased 35% to $1.6 billion from $1.2 billion. Micro controller revenues stood at $892 million, up 95% year-over-year. Subsequently, the company swung to a net income of $423 million or 90 cents per share as compared to a loss of $109.5 million or 24 cents per share. Furthermore, the company reported a record net cash balance of $517 million.

The company recently announced new generation maXTouch E-Series touch controllers including industry's first 32-bit single-chip touch screen controller for smartphones, eReaders, and tablets up to 12-inches. It also commenced shipping of maXTouch in Nokia's C7, Motorola's DROID PRO and Defy, HTC's Desire Z and Trophy 7, Sharp's SH8128U, and Toshiba's Regza T-01C.

Of the fourteen analysts covering the stock, 79% recommend it a buy, 14% rate a hold, while the remaining recommend a sell. On average, analysts expect an upside of 41% to $17.5 in value from current levels.

6. Spreadtrum Communications is a fabless semiconductor company that designs, develops and markets baseband processor, radio frequency (RF) transceiver and turnkey solutions for the wireless communications and mobile television market. Its integrated baseband processor solutions support a range of wireless communications standards, including GSM, GPRS and TD-SCDMA, an international 3G standard for wireless communications promoted by China.

During the fiscal year ended Dec. 2010, total revenue surged 230% year-over-year to $346.3 million, while gross margin grew 760 basis points to 44% from 36.4%. As a result, non-GAAP net income stood at $82 million or $1.56 per share as opposed to a loss of $9.6 million or 21 cents per share a year ago. Cash flow from operations stood at $168.1 million as compared to $19.7 million a year earlier.

Looking forward to the first quarter of 2011, the company anticipates revenue to be in the range of $130 - $135 million with gross margin in the range of 41.5%-42.5%. Revenue during the first quarter 2010 stood at $52.1 million.

Of the 12 analysts covering the stock, 67% recommend it a buy, while the remaining recommend a hold. There are no sell ratings on the stock. On average, analysts expect an upside of 44% to $27.4 in value from current levels.

5. Westell Technologies designs carrier-class equipment that delivers high-speed communications for telecommunications operators and internet service providers throughout North America and Europe. The company operates through three segments: Customer Networking Solutions (CNS) equipment, Outside Plant Systems (OSPlant Systems or OSP) equipment--both segments collectively referred to as combined equipment segments or equipment segments--and ConferencePlus services segment.

During the third quarter ended Dec. 2010, total revenue increased 12.8% to $48.3 million from $42.8 million, attributable to a 28% increase in revenue from the customer networking solutions division. Net income stood at $2.9 million or 4 cents per share, compared to $2.7 million or 4 cents per share in the year-ago quarter.

For the nine months ended Dec. 2010, cash flow from operating activities stood at $23.6 million, up 67% from $14.1 million in the comparable period a year ago. Accordingly, cash and cash equivalents increased 39.8% to $85.7 million from $61.3 million for the year ended Mar. 2010.

The stock has gained 139% during the past one year and currently trades at a PE of 3.5 - the lowest in the pack. Only one analyst who has given it a buy rating is covering it. The estimated upside is 59% to $5.5 in value from current levels.

4. AXT Inc is a China-based developer and producer of compound and single element semiconductor substrates, including substrates made from gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge).

For the fiscal year ended Dec. 2010, total revenue soared 72.5% y-o-y to $95.5 million, while gross margin grew 1,310 bps points to 38.2% from 25.1%. As a result, the company swung to a net income of $18.7 million or 57 cents per share, opposed to a net loss of $1.9 million or 7 cents per share in the earlier year. Cash and cash equivalents increased 40.1% to $23.7 million from $16.9 million a year earlier.

For first quarter of 2011, AXT estimates revenue between $24.0 and $25.0 million, up 28% greater from the same quarter of 2010. The company estimates net income per share between $0.11 and $0.13.

Of the four analysts covering the stock, 50% recommend a buy, while 25% rate it a hold. There are no sell ratings on the stock. On average, analysts expect an upside of 61% to $10.8 in value from current levels.

3. MIPS Technologies provides processor architectures and cores that power some home entertainment, communications, networking and portable multimedia products. The company's major customers include global semiconductor companies and original equipment manufacturers (OEMs).

For second quarter of 2011, total revenue increased by 44% to $21.9 million with license royalty units rising to 173 million units from 126 million units during the same period earlier. During the same period, revenue from royalties and license was up 30% and 85% from the second quarter of 2010, respectively. Meanwhile, GAAP net income was up by $2.8 million to $6 million, or 11 cents per share, from the year-ago quarter.

A Benchmark Capital analyst said that the transition to 4G will enable the company to gain a significant share in the broadband cellular modems market. Additionally, the company's key license agreements with China's baseband chip companies should allow it gain traction in the TD-SCDMA market. The analyst notes that MIPS has signed 10 mobile chip license deals, with six already announced. In the upcoming quarters, one or two more deals are likely to be announced.

Of the seven analysts covering the stock, 72% recommend a buy, while 14% each rate a hold on it. There are no sell ratings on the stock. On average, analysts expect an upside of 66% to $17.8 in value from current levels.

2. Magic Software Enterprises is involved in the development, marketing, selling and supporting of an application platform and business and process integration solutions. Through a global network of regional offices located across 50 countries, the company sells its products and services to independent software vendors, system integrators, distributors and value added resellers, OEMs and consulting partners.

For fourth quarter of 2010, the company reported 73% increase in total revenue to $25 million from the year-ago period. Net income for the same period stood at $3.1 million, surging 106.7%. For full-year 2010, net income and revenue were up 52% and 60% from 2009 levels, respectively. In January 2011, the company expanded its presence in Turkey with a new distributor Þenoðlu Yazýlým, who is estimated to contribute almost $0.7 million over 2011-13.

Rodman & Renshaw estimate revenue for first quarter of 2011 at $23 million, up 17% year-over-year. Net income is expected to at $2.5 million for the same period. Historically, revenues have been higher during the second half of the year. Hence, 2011 revenues and net income are expected at $106.6 million and $13.8 million, representing an annual growth of 20.3% and 38%, respectively.

Only one analyst who has given it a buy rating is covering it. The stock has an estimated 86% upside to $11 in value from current levels.

1. UniTek Global Services is a provider of permanently outsourced infrastructure services, offering a suite of technical services to the wireless and wire line telecommunications, satellite television and broadband cable industries in the U.S. and Canada. The company operates in two segments: Fulfillment, and Engineering & Construction.

For fourth quarter of 2010, consensus estimates of analysts polled by Bloomberg forecast the company to record sales of $96.6 million. Meanwhile, for full-year 2010, net loss is estimated at $24.25 million on net sales of $401.5 million.

In December 2010, the company secured a multi-million dollar contract from Bell Aliant--a leading Canadian telecom provider--to provide fiber-to-the-home engineering and construction services to almost 85,000 homes. Contract work commenced in the third quarter of 2010.

Of the four analysts covering the stock, 75% recommend a buy while the remaining rate a hold on it. There are no sell ratings on the stock. On average, analysts expect an upside of 115% to $18 in value from current levels.

>>To see these stocks in action, visit the 10 Technology Stocks With Upside portfolio on Stockpickr.

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