On Tuesday, CFRA, a market research firm, revised its price target for Lattice (OTC:LTTC) Semiconductor (NASDAQ:LSCC) shares, reducing it to $50 from the previous $76, while maintaining a Hold rating on the stock.
The adjustment follows Lattice Semiconductor's reported earnings per share (EPS) for the second quarter, which at $0.23, fell short of the anticipated $0.24 consensus and marked a significant decline from the $0.52 reported in the same quarter of the previous year.
Sales for the company decreased by 35% year over year and by 12% sequentially. The forecast for the third quarter, ranging between $117 million and $127 million, suggests a continuation of the year-over-year sales decline, which was more severe than expected.
The downturn was particularly notable in the industrial and automotive sectors, which saw a 50% decrease, and the communications and computing segments, which experienced a 15% drop.
Despite these setbacks, CFRA anticipates that revenue will stabilize in the third and fourth quarters, which typically see seasonal increases. This expectation is based on the belief that the worst of the inventory correction process for automotive and industrial customers has been absorbed. However, the firm acknowledges that the path to a sustained cyclical recovery for Lattice Semiconductor is still unclear.
CFRA highlighted the company's positive initiatives, such as the planned ramp-up of Nexus and Avant products, the expansion of the total addressable market (TAM), and opportunities for growth in content. Nonetheless, concerns remain regarding the potential loss of server market share.
Additionally, the report pointed out an increase in days inventory outstanding (DIO), which rose to 236, up from 195 in the first quarter and 177 from the same period last year. The ongoing vacancy in the CEO position at Lattice Semiconductor was also mentioned as a factor that could affect the company's performance.
The firm's financial position was noted, with net cash reported at $109 million. This financial update provides a snapshot of Lattice Semiconductor's current challenges and efforts to navigate market conditions.
In other recent news, Lattice Semiconductor has experienced a series of adjustments in its price target and mixed financial results. TD Cowen reduced the company's target from $80 to $60, while maintaining a Buy rating, following an earnings report that fell short of market expectations.
Similarly, Stifel has lowered the company's target from $67 to $55, maintaining a Hold rating, in response to a second-quarter revenue report that revealed earnings at the lower end of management's guidance and below market expectations.
In the face of these challenges, Lattice Semiconductor's management has demonstrated resilience, maintaining a steady gross margin of 69% and focusing on cash flow. The company has also launched new products like the Lattice MachXO5D-NX and the Lattice Sentry solution stack, which are expected to contribute to future growth.
Despite the recent downturn, Lattice Semiconductor is optimistic about its future prospects. The company forecasts a return to growth in the latter half of the year, driven by ongoing inventory normalization and new product introductions.
The firm's analysts have echoed this optimism, highlighting the strength of Lattice Semiconductor's product portfolio and the potential for improvement in the face of current market challenges.
These are the latest developments for Lattice Semiconductor, a company that continues to navigate through a period of CEO uncertainty and broader economic challenges while laying the groundwork for future growth.
InvestingPro Insights
In light of CFRA's revised price target for Lattice Semiconductor (NASDAQ:LSCC), examining the company through the lens of InvestingPro data and tips offers additional context for investors. Lattice Semiconductor is currently trading at a high earnings multiple with a P/E ratio of 35.05, which suggests that the stock might be valued optimistically relative to its near-term earnings growth. With analysts revising their earnings downwards and anticipating a sales decline in the current year, the market's high expectations may be set for reassessment.
InvestingPro data reveals a revenue decline of 0.07% over the last twelve months as of Q1 2024, with a more pronounced quarterly revenue drop of 23.6% in Q1 2024. Despite these challenges, the company's financial health shows some resilience, with a gross profit margin of 69.53% and an operating income margin of nearly 25% during the same period. Additionally, with liquid assets exceeding short-term obligations and cash flows that can sufficiently cover interest payments, Lattice Semiconductor appears to be maintaining a degree of financial stability.
For investors seeking a deeper analysis, there are 18 additional InvestingPro Tips available for Lattice Semiconductor, which can be accessed at Investing.com/pro/LSCC. To enrich your investment strategy with these insights, consider using the special coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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