I first took a shine to Integrated Device Technology (IDTI) over a year ago and in that time shares have gone on a nice round trip, travelling from $17 per share to a high of $28.70 before the rug got pulled out from under it earlier this month landing right back at the $17 level.

What caused the fall? The proximate reason was its Q3 earnings reported on February 1, in which it beat top and bottom line estimates but narrowed revenue guidance for 2016 to the lower end of the range. But I think the real reason was it simply got caught up in the selling frenzy of high p/e tech stocks that has hit the market hard of late.

I think stock is now very oversold, trading at a reasonable value and this $17 level offers good support and solid entry point for restarting a bullish position.

What originally drew to this company was as a means to play the burgeoning growth in wireless power. That is the ability to recharge devices, especially phones, tablets and watches, without plugging them in. Powermats for the home and recharging WiFi hot spots in airports, hotels and places like Starbucks (SBUX) will become more ubiquitous in coming years.   Research firm HDI predicts the market will be worth $7.5 billion in 2017 as compared to just $216 million in 2013.  So this is the area where I expect the company to deliver accelerated growth over the long term. But it remains something of untapped green field at this point.

Solid Core Business

The latest earnings report showed IDTI has a solid business with core product line that’s showing solid growth. The company posted adjusted earnings of 35 cents per share on revenue on $177.6 million, a 32% and 21% increase respectively over the year ago period. Yet the shares currently trade at just 17x forward earnings.

The company has narrowed its focus to three main categories; Communications infrastructure, High-performance computing and Flexible power management. It’s the flexible power unit, which includes, the wireless charging, that has enjoyed the greatest growth as IDTI provides chips and technology that help devices run more efficiently.

All of the tablet, accessory, and especially wearable consumer electronics that have been so in demand require systems to optimize their power usage. On that front, IDT should have plenty of customers for their flexible power management products. the management team demonstrated adept navigation of the markets by stating that “we are not targeting power management areas we consider to be commoditized or crowded competitively” in its company report. Instead it is providing value added components that will lay the groundwork for wireless charging.

IDT should also see massive demand for its communications infrastructure products due to China’s expansion of 4G service offerings. Earlier this year, the Chinese government granted 4G LTE licenses to wireless carriers China Telecom and China Unicom. Previously, the only carrier in China capable of providing such services was China Mobile, which added 53 million users to its 4G service platform in the first quarter of this fiscal year alone, bringing its total to 143 million customers now on 4G. With all those new customers on 4G, IDT will benefit from increasing demand for its data usage efficiency products. Indeed smartphone maker LG recently announced it will build an IDT wireless power receiver chip into its flagship G4 model which is the second best selling device in the Southeast Asian market. .

Consolidation of Power Players

The wireless charging market has already seen consolidation, with the announcement of an agreed merger between Power Matters Alliance and Alliance for Wireless Power earlier this year. With big players like Intel (INTC) and Samsung getting involved in wireless charging there could be room for more consolidation in the future.

Takeovers potential alone is not a reason to invest in a company but it is a nice possible catalyst for a higher share price.

The Trade:

Once again I want use a strategy that gives unlimited upside and plenty of time for the bullish thesis to play out.  This means making the out right purchase of call options. I’m targeting the January 2017 LEAPs with a $22 strike price. Specifically;

–Buy Janury2017 $18 calls at $4.00 a contract.

I think shares could climb back to the old highs near $27 over the next eight months. By using these long dated calls will mitigate time decay and allow us to ride out any short –term dips.

If it achieves the price target it would value the calls at a minimum of $9 for a $5, or 125% gain.