Cypress Semiconductor (NASDAQ:CY) stockholders have enjoyed windfall gains of late since Infineon announced that it would be acquiring the Internet of Things (IoT) specialist for a princely sum. The deal is expected to close by the end of the year or in early 2020. Long-term Cypress shareholders will end up a happy lot, as the stock has beaten the broader market comfortably over the past three years.

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Cypress' acquisition doesn't come as a surprise. The chipmaker was pulling the right strings to take advantage of diverse markets such as IoT and automotive, and this attracted Infineon's attention. The good news is that there's another potential takeover candidate in the semiconductor space that's identical to Cypress -- Sierra Wireless (NASDAQ:SWIR). Let me explain why.

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Sierra is sitting on identical opportunities

Cypress dedicated 85% of its $364 million research and development outlay for 2018 on IoT and automotive-related technologies. That's because the company was enjoying impressive growth on both these fronts, especially automotive, which now supplies over a third of the company's total revenue. As it turns out, one of Cypress' automotive chips had $1.2 billion worth of design wins in the pipeline.

Similarly, Sierra Wireless is going after the automotive market with a variety of products, and has scored a few big wins as well. The company pointed out in an earnings conference call earlier this month that its existing automotive design wins stand to deliver $1.1 billion in revenue over the next half-decade.

The design wins will start bearing fruit sooner rather than later, as Sierra has clarified that two of its automotive design wins, including German giant Volkswagen, will kick in during the second quarter. But don't be surprised to see an uptick in Sierra's end-market opportunity in the automotive space.

The connected car market is estimated to clock a compound annual growth rate of 17% through 2025 according to Allied Market Research. As a result, demand for Sierra's automotive modules should get better in the future as more automotive programs ramp up. This makes Sierra an attractive bet for anyone looking to get into the automotive connectivity space.

Meanwhile, the gradual growth in IoT deployments will prove to be yet another tailwind for Sierra Wireless in the long run. Demand for the company's low-power wide-area (LPWA) network modules is picking up. Sierra enjoys huge potential here, as the number of LPWA connections is estimated to grow to more than 2 billion in 2022 from 113 million in 2017, according to market intelligence firm Ovum.

As such, Sierra Wireless is sitting on a ton of opportunity in both the IoT and automotive connectivity verticals. The company is targeting $1 billion in annual revenue in the next three to four years, compared to its trailing-12-month revenue of $780 million, with 60% of its top line coming from IoT solutions.

What's more, Sierra expects IoT solutions to clock over 40% in gross margin in the long run, which will boost the company's profitability from its current number of just over 36%. All of this, along with the company's valuation, would make Sierra a nice takeover target.

Sierra is attractively valued

Sierra Wireless trades at a price-to-sales ratio of just 0.60. This is half of the company's five-year average price-to-sales ratio, and well below the 2.4 industry average multiple. Moreover, Sierra's price-to-book ratio of 1 is also lower than the industry average ratio of 3.6 and Sierra's own five-year average of 1.9.

Sierra's balance sheet is also decent, with negligible debt of just over $30 million. Sierra is also a much smaller company compared to Cypress, with a market cap of just over $450 million, which would make it a good bolt-on acquisition for a bigger player looking to scale up its connectivity business.

So don't be surprised if Sierra Wireless becomes a takeover target in the future thanks to the opportunities that it is pursuing.