Lattice Semiconductor stock target cut, maintains a buy rating on Investing.com
Needham maintained a buy rating on Lattice (OTC:) Semiconductor (NASDAQ: LSCC ) but lowered the price target to $61 from $80 previously due to Lattice's failure to meet expectations from second-quarter results.
Confirmation that Lattice's earnings per share were $0.23, down from the consensus estimate of $0.24.
Needham they said the shortfall was mainly due to ongoing inventory maintenance, especially in the Industrial and Automotive sectors.
An analyst from Needham noted that the current weakness in Lattice Semiconductor's performance is not due to a loss of market share but rather the result of the company entering the downturn later than its competitors. It has also been suggested that the excess inventory may be more significant than initially expected. Despite these challenges, there have been positive signs, such as improvement in bookings and backlogs quarter on quarter.
Expectations for the second half of 2024 have been reduced, as now revenue estimates will be lower than those of the first half of the year. This revision led to a decrease in the company's earnings estimates. The analyst expressed the belief that this adjustment could lead to investors assigning a double bottom price to Lattice Semiconductor shares.
The Needham report concluded at a revised valuation of 35 times for the calendar year 2026 next generation's earnings per share (NG EPS).
The company's sales also fell 35% year-on-year and 12% sequentially. Inflation was most noticeable in the industrial and automotive sectors, which decreased by 50%, and the telecommunications and computer components, which decreased by 15%.
InvestingPro Insights
InvestingPro's latest data and analysis provides more context on Lattice Semiconductor (NASDAQ:LSCC). The company is currently trading at a high price-to-earnings ratio, with a P/E ratio of 40.64, and even after adjusting for the last twelve months from Q1 2024, it stands at 34.2. This is in line with concerns expressed by Needham about the potential for investors to assign a low multiple to Lattice shares. Additionally, the company's revenue showed a slight decline of 0.07% in the last twelve months from Q1 2024, with a 23.6% decline in quarterly revenue in Q1 2024, which may highlight the challenges ahead.
Even better, InvestingPro Tips indicates that Lattice Semiconductor's cash flow can adequately cover interest payments and that its liquid assets exceed short-term obligations, suggesting a certain degree of financial stability. However, analysts have revised down their future earnings and expect a drop in sales this year, which is consistent with the warning expressed by Needham.
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