It’s usually the same old 5G stocks that hog the limelight. But the spotlight has been shining in the wrong spot. Over the last two years, one of the best 5G stocks has been overlooked: Lattice Semiconductor Corp (NASDAQ:LSCC).
No matter how you look at it, LSCC stock has been trouncing the broader market. It’s up 160% year-over-year and 255% since the market bottomed in late March 2020. Lattice Semiconductor stock also rose by 140% in 2020 and 178% in 2019.
Despite these massive gains, LSCC stock still has lots of room to run. In 2021, it could double from its current level.
Even compared to its industry peers, Lattice Semiconductor stock is almost untouchable.
Below is a performance chart comparing Lattice Semiconductor Corp to Defiance 5G Next Gen Connectivity ETF (NYSEARCA:FIVG), First Trust Indxx NextG ETF (NASDAQ:NXTG), and VanEck Vectors Semiconductor ETF (NASDAQ:SMH) since the start of 2019.
Chart courtesy of StockCharts.com
LSCC Stock Overview
Lattice Semiconductor is the world’s leading provider of programmable, smart connectivity technology. The company helps its more than 8,000 global customers implement their own designs, create lower development costs, and improve overall time-to-market. (Source: “Corporate Overview: First Quarter, 2021,” Lattice Semiconductor Corp, last accessed March 4, 2021.)
As the world’s largest supplier of low-power field-programmable gate array (FPGA) products by volume, Lattice Semiconductor has a strong foothold in a lucrative, niche end market that includes communications (5G wireless and switches/routers), computing (servers and client), industrial (Internet-of-Things and factory automation), automotive (infotainment and advanced driver assistance), and consumer (wearables and smart homes).
FPGA is the holy grail for 5G tech companies because the integrated circuits can be programmed anywhere after being manufactured. This allows businesses to customize integrated circuits for their own purposes.
This has more practical purposes, too. There could even come a time when the typical computer user can use FPGAs to tailor their own microprocessors to meet their personal needs.
Its customers include Nokia Corporation (NYSE:NOK), Amazon.com, Inc. (NASDAQ:AMZN), Panasonic Corporation (TYO:6752, OTCMKTS:PCRFY), Sony Corp (NYSE:SNE), and Samsung Electronics Co Ltd.
$60-Million Share Repurchase Program
In February, Lattice Semiconductor Corp announced a $60.0-million stock repurchase program over the next 12 months.
“This share repurchase program reflects the continuing financial strength of our business and reinforces our commitment to enhancing shareholder value,” said Sherri Luther, CFO. (Source: “Lattice Semiconductor Announces Stock Repurchase Program,” Business Wire, February 23, 2021.)
Strong Full-Year Earnings Growth
For the fourth quarter ended January 21, 2021, Lattice Semiconductor announced that its revenue increased 6.9% year-over-year to $107.1 million. (Source: “Lattice Semiconductor Reports Fourth Quarter and Full Year 2020 Results,” Lattice Semiconductor Corp, February 16, 2021.)
The company’s gross margin expanded from 59.2% to 60.5%, with its earnings per share (EPS) up 20%, at $0.12 per share. Its adjusted earnings increased to $0.19 from $0.17 in the same period of the previous year.
Lattice Semiconductor’s full-year revenue inched up one percent to $408.1 million, with its gross margin expanding 110 basis points to 60.1%. The company’s full-year EPS were $0.34, compared to $0.32 in 2019. Its full-year adjusted EPS were up 16% year-over-year at $0.69, versus $0.59 in 2019.
With approximately $92.0 million in cash generated from operations for the full year, Lattice Semiconductor further strengthened its balance sheet, ending the year with a positive net cash position.
For the first quarter of 2021, Lattice Semiconductor Corp expects to report:
- Revenue in the range of $106.0 and $114.0 million, compared to Q1 2020 revenue of $97.3 million
- Adjusted gross margin of 61.5% (plus or minus one percent), versus 59.8% in Q1 2020
- Adjusted total operating expenses in the range of $38.0 and $39.0 million, compared to $36.1 million in Q1 2020
Lattice Semiconductor stock is an excellent 5G stock that has been quietly trouncing the broader market for the last two years. That includes a 140% gain in 2020, the year that was wracked by both a global pandemic and recession.
For the year, Lattice Semiconductor Corp reported double-digit revenue growth in its two largest markets and profitability that had increased significantly. That momentum is expected to continue in the first quarter of 2021.