On Tuesday, CFRA adjusted its outlook on Lattice (OTC:) Semiconductor (NASDAQ:LSCC), reducing the price target from $50.00 to $48.00 while sustaining a Hold rating on the stock. The firm cited a valuation based on a price-to-earnings (P/E) ratio of 33 times their projected earnings per share (EPS) for 2026, which is higher than that of Lattice’s peers but lower than its historical average.
The revision follows Lattice Semiconductor’s third-quarter earnings report, which showed an EPS of $0.24, aligning with consensus estimates but falling significantly from the $0.53 reported in the same quarter the previous year. Sales decreased by 34% year-over-year, with a slight sequential increase of 2.4%. The company’s guidance for the fourth quarter suggests further declines, with anticipated year-over-year drops of 30% and a quarter-over-quarter decrease of 11%.
The forecasted downturn is attributed mainly to a 51% decrease in the industrial and automotive sectors. CFRA anticipates that the current inventory correction will continue through the middle of 2025, as the channel reduces inventory levels in response to sluggish end-demand. Moreover, internal inventories remain high, with days inventory outstanding (DIOs) at 242, an increase from 236 in the second quarter and 165 from the previous year.
Looking ahead, CFRA believes that Lattice Semiconductor’s Nexus and Avant product lines have growth potential in 2025, with expectations of 3%-6% growth for that year and the possibility of a 15%-20% compound annual growth rate (CAGR) in the long term. The firm is also watching to see how new CEO Ford (NYSE:) Tamer, who previously led Inphi (NASDAQ:), will steer the company. Additionally, the company’s recently announced reduction of its workforce by 14% is expected to bolster operating margins in 2025.
In other recent news, Lattice Semiconductor has reported a series of developments that have caught the attention of market watchers. The company recently released its Q3 2024 financial results, revealing a revenue of $127.1 million, which represents a 34% decrease from the previous year due to inventory normalization. Despite this downturn, the company has managed to maintain a stable gross margin at 69%.
In response to these financial results, Needham has revised its price target for Lattice Semiconductor to $56, while maintaining a Buy rating. Similarly, Baird has adjusted its price target for the company to $44, but also continues to hold an Outperform rating. Stifel, on the other hand, has retained its Buy rating and $55 price target, indicating confidence in the company’s long-term growth potential.
In light of these changes, Lattice Semiconductor has implemented a 14% reduction in its workforce and operating expenses, aiming to improve efficiency without affecting product quality. The company has also projected a U-shaped recovery, anticipating low single-digit revenue growth in 2025.
InvestingPro Insights
Lattice Semiconductor’s current financial landscape, as reflected in InvestingPro data, aligns with CFRA’s cautious outlook. The company’s P/E Ratio (Adjusted) stands at 46.62, indicating a high earnings multiple that corroborates CFRA’s valuation concerns. This is further supported by an InvestingPro Tip highlighting that LSCC is “Trading at a high earnings multiple.”
The revenue decline noted in the article is starkly reflected in the InvestingPro data, showing a Revenue Growth of -24.23% over the last twelve months as of Q3 2024. This trend is expected to continue, as another InvestingPro Tip suggests that “Analysts anticipate sales decline in the current year.”
Despite these challenges, Lattice Semiconductor maintains a strong financial position. An InvestingPro Tip points out that “Liquid assets exceed short term obligations,” which could provide some stability during the ongoing inventory correction period mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Lattice Semiconductor, providing deeper insights into the company’s financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.