On Tuesday, KeyBanc Capital Markets adjusted its outlook on Lattice (OTC:LTTC) Semiconductor (NASDAQ:LSCC), reducing the price target to $54 from the previous $60, while maintaining an Overweight rating on the stock.
The adjustment follows the company's third-quarter results, which met expectations, and its fourth-quarter guidance, which was set lower due to ongoing challenges in the industrial sector. This weakness was somewhat balanced by stronger performance in communications and computing markets.
Lattice Semiconductor's management anticipates the industrial correction and inventory reduction to continue through the first half of 2025. They expect a U-shaped recovery to follow. In response to the current market conditions, Lattice initiated a significant reduction in workforce and operating expenses last week, aiming to streamline operations.
The company predicts low single-digit revenue growth and low double-digit earnings per share growth for 2025, with aspirations to return to model growth of 15-20% revenue growth in 2026.
The company's strategic measures include a 14% cut in its workforce and operating expenses, as part of its efforts to mitigate the impact of the industrial market's downturn. These steps are taken in the hope of improving financial performance in the forthcoming years.
Despite the near-term headwinds and the consequent adjustments to estimates and price target, KeyBanc expressed a long-term positive outlook for Lattice Semiconductor. The firm's analyst highlighted the potential for revenue and earnings per share growth driven by market share gains and total addressable market expansion, particularly through the company's Avant product line.
In other recent news, Lattice Semiconductor has experienced a series of significant developments.
Earnings and revenue results show third-quarter earnings per share (EPS) of $0.24 and revenue of $127.1 million, marking a 34% decrease from the previous year due to inventory normalization. The company's guidance for the forthcoming quarters suggests further declines, attributed mainly to a 51% decrease in the industrial and automotive sectors.
Several analyst firms have revised their price targets for Lattice Semiconductor. TD Cowen cut its price target to $50 while maintaining a Buy rating, citing the company's guidance miss for the fourth quarter of 2024 and a forecast for modest growth in 2025. CFRA reduced its price target from $50.00 to $48.00, sustaining a Hold rating.
Needham maintained a Buy rating but reduced the price target to $56, and Baird adjusted its price target down to $44, maintaining an Outperform rating. Stifel retained its Buy rating and $55 price target, expressing confidence in the company's long-term growth potential.
Lattice Semiconductor has implemented a 14% reduction in its workforce and operating expenses to enhance efficiency. The company anticipates a U-shaped recovery with low single-digit revenue growth in 2025.
These recent developments reflect Lattice Semiconductor's strategic focus on stabilizing operations and executing its current product roadmap.
InvestingPro Insights
To complement KeyBanc's analysis of Lattice Semiconductor (NASDAQ:LSCC), recent data from InvestingPro offers additional context to the company's current situation. The stock's P/E ratio stands at 36.41, indicating that investors are still willing to pay a premium for LSCC shares despite the recent challenges. This valuation metric aligns with an InvestingPro Tip noting that LSCC is "Trading at a high earnings multiple."
The company's revenue for the last twelve months as of Q3 2024 was $562.58 million, with a concerning revenue growth of -24.23% over the same period. This decline supports another InvestingPro Tip stating that "Analysts anticipate sales decline in the current year." Despite these headwinds, LSCC maintains a strong gross profit margin of 68.9%, suggesting efficient cost management even as it navigates the industrial sector downturn.
It's worth noting that while the stock has taken a significant hit over the last six months, with a price total return of -26.83%, it has shown resilience in the shorter term, posting a 16.82% return over the past three months. This recent uptick could indicate that investors are beginning to factor in the company's cost-cutting measures and potential for future growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Lattice Semiconductor, providing a deeper dive into the company's financial health and market position.
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