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Takeaway: A $2 billion market cap puts SLAB is in the sweet spot for a hungry acquirer.

Hedgeye’s semiconductors sector head Craig Berger debuted with a detailed analysis of his complex and wide-ranging sector, identifying companies that could be attractive acquisition targets in a sector that has traditionally seen waves of companies buying each other. 

One name that stands out is Silicon Labs (SLAB), a premier vendor of chips, software, and systems for the burgeoning “Internet Of Things” market. The company seems to be an attractive M&A candidate on a number of Berger’s key screens.

Silicon Labs (SLAB): Internet of Things Portfolio & Acquisition Appeal - sl9

SLAB’s website says they offer a “diverse portfolio of highly-integrated, easy-to-use solutions” providing “significant advantages in performance, size, cost and power consumption.”  The firm’s IoT portfolio includes sensors, short range wireless products and tiny computers on a chip known as Microcontrollers. Berger says that Silicon Labs’ chip and system solutions are often the smallest footprint and most integrated solutions in the world.

Our proprietary technical screen has SLAB bearish on both TRADE and TREND time horizons – out as much as three months.  But, says Berger, near-term fuzziness in the stock could provide a unique buying opportunity for patient investors.  The stock has a two-year pattern of trading in the $40-$50 range – not a bad return if you catch it right.  For a larger company looking to enter the Internet of Things space, the Make-Or-Buy decision could be compelling, particularly with the stock showing relative weakness.

At a $2 billion market cap, SLAB is in the sweet spot for a hungry acquirer: small enough to digest, yet big enough to be a serious deal that will attract strong interest from bankers, investors, and any firm looking to meaningfully participate in the burgeoning Internet of Things market.