Lattice Semiconductor Corp: Overlooked 5G Stock Continues to Trump Market

Lattice Semiconductor Stock Bullish on Record Q2

Over the past two years, Lattice Semiconductor Corp (NASDAQ:LSCC) has been one of the best-performing and most-overlooked 5G stocks. Even in a wobbly bull market, it continues to quietly inch into record territory.

The numbers don’t lie; Lattice Semiconductor stock has been trouncing the broader market. It has risen by:

  • 27% year-to-date
  • 98% year-over-year
  • 326% since bottoming in March 2020
  • 140% in 2020
  • 178% in 2019

As you can see in the below chart, when it comes to the broader market, it isn’t even close.

Since the start of 2019, the S&P 500 has returned a respectable 79.5% and the Defiance 5G Next Gen Connectivity ETF (NYSE:FIVG) has rallied by roughly 59%. Solid numbers, but nothing compared to LSCC stock’s gain of 741%.

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Chart courtesy of StockCharts.com

Lattice Semiconductor stock comes by those gains honestly. The company has been reporting strong financial results quarter after quarter. And with the 5G industry still in its infancy, the outlook for LSCC stock is bright.

The average 12-month price target for Lattice Semiconductor Corp is $59.25, with a high estimate of $68.00, which suggests potential upside of 1.7% to 17%. Though, as you might know, analysts tend to be a conservative bunch, so a 12-month target for LSCC stock of $76.00 is certainly within reach.

LSCC Stock Overview

Lattice Semiconductor is the 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: August 2021,” Lattice Semiconductor Corp, last accessed August 27, 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 lucrative, niche markets, including:

  • Communications (5G wireless, switches/routers)
  • Computing (servers, client)
  • Industrial (Internet-of-Things, factory automation)
  • Automotive (infotainment, advanced driver assistance)
  • Consumer (smartphones, wearables, smart homes, etc.)

Lattice Semiconductor Corp also provides intellectual property (IP) licensing and other services.

The company’s customers include Cisco Systems Inc (NASDAQ:CSCO), Amazon.com, Inc. (NASDAQ:AMZN), and Sony Corporation (NYSE:SONY).

Another Strong Quarter

In early August, Lattice announced that its revenue for the second quarter of 2021, ended July 3, increased by 25% year-over-year and nine percent quarter-over-quarter to $125.9 million. (Source: “Lattice Semiconductor Reports Second Quarter 2021 Results,” Lattice Semiconductor Corp, August 3, 2021.)

The company reported second-quarter 2021 net income of $21.8 million, or $0.15 per share. This is a 105.5% increase over the second-quarter 2020 net income of $10.6 million, or $0.08 per share, and a 16.1% increase over the first quarter of 2021 net income of $18.8 million, or $0.13 per share.

Lattice Semiconductor Corp’s adjusted net income in the quarter was $35.2 million, or $0.25 per share. This is up by 49.5% from $23.5 million, or $0.17 per share, in the same period last year and up by 14.7% from $30.6 million, or $0.22 per share, in the previous quarter.

The company reported second-quarter 2021 operating income of $23.3 million, up by 86.8% from $12.4 million in the second quarter of 2020 and up 12.9% from $20.6 million in the first quarter of 2021.

Year-to-date, Lattice Semiconductor Corp generated $71.0 million in cash flow from operations and repurchased $40.0 million of the company’s own shares.

Jim Anderson, the company’s president and CEO, said, “We drove 25% year-over-year revenue growth, with a 49% expansion in [non-generally accepted accounting principles] net income year-over-year.” (Source: Ibid.)

He added, “Strong revenue growth was driven by double-digit growth in each of our market segments based on the strength of our market leading portfolio. We are excited to be in a new growth phase, with multiple growth vectors across our end markets.”

Business Outlook

For the third quarter of 2021, Lattice Semiconductor Corp expects to report:

  • Revenue between $124.0 and $132.0 million, compared to $103.0 million in Q3 2020
  • Gross margin of 62% (plus or minus one percent on an adjusted basis), compared to 60.5% in Q3 2020
  • Total operating expenses between $42.0 and $44.0 million on an adjusted basis, compared to $27.3 million in the same period last year

Analyst Take

When it comes to market-trumping gains, few 5G stocks can compete with Lattice Semiconductor Corp. In 2020, a year hobbled by the COVID-19 pandemic, LSCC stock still managed to soar by 140%.

The bull market has been a little unpredictable in 2021, but investors should expect to see more gains from Lattice Semiconductor stock in 2021 and beyond as the global economy heats up and 5G technology gains global traction.