Lattice Semiconductor Corp: Overlooked 5G Stock Set for More Gains

Lattice Semiconductor StockLattice Semiconductor Stock Surges 225% Since March

Lattice Semiconductor Corp (NASDAQ:LSCC) is a great, under-the-radar 5G stock that continues to outpace the broader market. LSCC stock is up 133% year-over-year, 130% year-to-date, and 225% since hitting its low in March.

Lattice Semiconductor stock has made big gains in the last few months. I last looked at the tech stock in early October, when it was trading hands at $29.77. LSCC stock is up 45% since then and up approximately 25% since the November election.

For the sake of comparison, Defiance Next Gen Connectivity ETF (NYSEARCA:FIVG) is up 27% year-to-date and up 80% since March. The S&P 500 is up 14% year-to-date and up approximately 69% since March. All solid gains, but still trailing Lattice Semiconductor stock by a big margin.

LSCC stock’s growth is not new, but the advent and promise of 5G has helped propel the stock higher in the last two years. In 2019, Lattice Semiconductor stock soared 270%. Since the start of 2019, it has exploded by 1,509%.

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There’s more than enough reason to be bullish on Lattice Semiconductor Corp’s near- and long-term growth projections. The overall economy may still be taking a beating from the coronavirus pandemic, but that hasn’t been holding back the rollout of 5G. If anything, the 5G revolution is just getting off the starting block.

Chart courtesy of StockCharts.com

LSCC Stock Overview

Across the entire network, from the edge to the cloud, Lattice Semiconductor solves the biggest communications, datacenter, industrial, automotive, and consumer challenges. (Source: “Investor Presentation, Fourth Quarter 2020,” Lattice Semiconductor Corp, last accessed December 14, 2020.)

The company is the leading provider of programmable, smart connectivity technology to more than 8,000 global customers.

Lattice Semiconductor helps its customers implement their own designs, lower their development costs, and improve their overall time-to-market.

As the only company invested in small, low-power field-programmable gate array (FPGA) products, Lattice Semiconductor Corp has a strong foothold in a lucrative, niche end market that includes communications (5G wireless, switches/routers), computing (servers, client), industrial (Internet-of-Things, factory automation), automotive (infotainment, advanced driver assistance), and consumer (smartphones, wearables, smart homes, etc.).

5G tech companies have been aching for FPGAs because the integrated circuits can be programmed anywhere after being manufactured. This allows customers to customize integrated circuits for the own purposes.

There could even come a time when the typical computer user can use FPGAs to tailor their own microprocessors to meet their personal needs. That’s still a ways away yet, but it shows the potential that Lattice Semiconductor Corp has.

Lattice Semiconductor’s customers include Amazon.com, Inc. (NASDAQ:AMZN), Cisco Systems, Inc. (NASDAQ:CSCO), Dell Technologies Inc (NYSE:DELL), and Sony Corp (NYSE:SNE).

Solid Third-Quarter Results

In late October, Lattice Semiconductor announced that its revenue for the third quarter ended September 26 inched up 2.4% quarter-over-year to $103.0 million. (Source: “Lattice Semiconductor Reports Third Quarter 2020 Results,” Lattice Semiconductor Corporation, October 27, 2020.)

The company reported third-quarter net income of $12.6 million ($0.09 per share), up 18.9% from $10.6 million ($0.08 per share) in the second quarter of 2020. Adjusted net income was $26.6 million ($0.19 per share), up 13.1% from $23.5 million ($0.17 per share) in the second quarter.

Lattice Semiconductor reported third-quarter operating income of $12.8 million, up 2.7% from $12.4 million in the second quarter. Its adjusted operating income was up 9.1% sequentially, at $27.3 million.

Sherri Luther, CFO, noted,

We continued to see significant improvements in our key financial metrics for the third quarter of 2020 with diluted [earnings per share] increasing 13% on a [generally accepted accounting principles (GAAP)] basis and 12% on a non-GAAP basis compared to the prior quarter. Year to date, we generated approximately $69 million of cash flow from operations, and ended the third quarter of 2020 with a positive net cash position further reinforcing our commitment to ongoing cash generation.

(Source: Ibid.)

For the fourth quarter of 2020, Lattice Semiconductor Corp expects to report:

  • Revenue between $99.0 and $107.0 million, compared to $100.2 million in Q4 2019
  • Gross margin percentage of 61% (plus or minus one percent) on an adjusted basis, compared to 59.6% in Q4 2019
  • Total operating expenses between $36.5 and $37.5 million, on an adjusted basis, compared to $35.3 million in Q4 2019

Analyst Take

Lattice Semiconductor stock experienced solid gains in 2019 and has done the same in 2020, despite the coronavirus shutting down the global economy in the second quarter. The company reported solid Q3 results, with significant improvements in its key financial metrics.

Looking forward, Lattice Semiconductor Corp expects to continue its winning ways, which includes a focus on profitability and cash generation.