Lattice Semiconductor Stock Might Have 50% Upside
Lattice Semiconductor Corp (NASDAQ:LSCC) is one of the most interesting yet overlooked 5G stocks. This is despite LSCC stock historically outperforming the majority of its peers and the broader semiconductor sector.
Lattice Semiconductor stock advanced 174% in 2019, 135% in 2020, and 67% in 2021. While LSCC stock is down by 17% so far in 2022, it’s still up by 31.4% year-over-year, despite the tech stock sell-off.
In comparison, the tech-heavy Nasdaq is down by 10.5% in 2022 and 0.3% year-over-year. iShares PHLX Semiconductor ETF (NASDAQ:SOXX) is down by 10.9% year-to-date and up by 10.7% year-over-year.
Why the bullish sentiment about Lattice Semiconductor stock?
It’s a no-brainer, really. Lattice Semiconductor Corp reports excellent quarterly results (it just reported a fourth-quarter revenue and earnings beat), significant cash generation, ongoing profitability, and strong guidance. It also continues to pay down its debt.
Despite LSCC stock’s impressive gains, it still has room to run. Wall Street analysts’ average 12-month share-price estimate for Lattice Semiconductor stock is $81.00, and their high estimate is $95.00. This points to potential upside of approximately 33% and 50%, respectively.
Chart courtesy of StockCharts.com
About LSCC Stock
From edge computing to the Cloud, Lattice Semiconductor solves the biggest communication, data center, industrial, automotive, and consumer challenges. (Source: “Corporate Overview: November 2021,” Lattice Semiconductor Corp, last accessed February 16, 2022.)
With more than 8,000 customers globally, the company is the leading provider of programmable, smart connectivity technology. Lattice Semiconductor Corp helps its customers implement their own designs, lower their development costs, and improve their overall time-to-market.
In addition to having the lowest power consumption and smallest size, the company’s family of small form-factor devices has the highest security.
This might explain why Lattice Semiconductor Corp has a big foothold in growing end markets, such as communications (5G wireless, switches/routers), computing (servers, client), industrial (Internet of Things, factory automation), automotive (infotainment, driver assistance), consumer (smartphones, wearables, smart homes), and broadcasting.
Acquisition Deepens Offerings in Computing & Automotive Segments
In November 2021, Lattice Semiconductor Corp announced that it had completed the all-cash acquisition of Mirametrix Inc., an artificial intelligence (AI) software company that enables humans and computers to interact. (Source: “Lattice Acquires Mirametrix,” Business Wire, November 15, 2021.)
Mirametrix isn’t a household name, but the Canadian company is known for attention-sensing technology, namely object, face, eye, and gaze tracking. The company’s software has been deployed in more than 20 million end-user systems worldwide.
These technologies will give Lattice more solutions to offer to automotive and computing customers.
Q4 Earnings Beat & Strong Guidance
For the fourth quarter of 2021, ended January 1, 2022, Lattice Semiconductor announced that its revenue increased by 32.3% year-over-year and 7.5% sequentially to $141.8 million. Analysts had been looking for revenue of $133.6 million. (Source: “Lattice Semiconductor Reports Fourth Quarter and Full Year 2021 Results,” Lattice Semiconductor Corp, February 15, 2022.)
The company reported fourth-quarter 2021 net income of $28.5 million, or $0.20 per share.
That was a 78.5% increase over the $15.9 million, or $0.11 per share, in the same prior-year period and a 6.7% increase over the $26.7 million, or $0.19 per share, in the third quarter of 2021.
Lattice Semiconductor Corp’s adjusted net income came in at $45.3 million, or $0.32 per share. That was versus $27.5 million, or $0.19 per share, in the fourth quarter of 2020 and $39.6 million, or $0.28 per share, in the third quarter of 2021. Wall Street had been calling for adjusted earnings of $0.27 per share.
The company has topped analysts’ revenue and earnings expectations in each of the last four quarters.
Jim Anderson, Lattice Semiconductor Corp’s president and CEO, commented, “We’re excited to have entered a new growth phase for the company in 2021 driven by our leadership product portfolio, and growth in our key end market segments.” (Source: Ibid.)
He continued, “And we’re excited about the year ahead as we continue to execute to our long-term strategy and build momentum across our customer base.”
For the first quarter of 2022, Lattice Semiconductor Corp expects to report:
- Revenue between $141.0 and $151.0 million, compared to $115.0 million in Q1 2021
- Adjusted gross margin of 66% (plus or minus one percent), compared to 60.1% in Q1 2021
- Total adjusted operating expenses between $46.0 and $48.0 million, compared to $49.9 million in Q1 2021
Lattice Semiconductor Corp made impressive financial gains in 2019. It also did remarkably well in 2020, despite the coronavirus plunging the world into a global recession.
That momentum has continued, with the company recently reporting double-digit earnings growth and its fourth consecutive quarter of double-digit revenue growth year-over-year.
It wasn’t that long ago that Lattice Semiconductor Corp was running at a loss, but now it throws off lots of cash: $29.0 million in the fourth quarter. Management’s strong guidance is icing on the cake.
All of that means Lattice Semiconductor stock could be on its way up.