On Tuesday, Lattice (OTC:LTTC) Semiconductor (NASDAQ:LSCC) shares maintained Buy rating and $55.00 price target from Stifel. The semiconductor company reported earnings that were in line with expectations but provided a fourth-quarter forecast below the market consensus.
The company's medium-term outlook appears less optimistic, with projections for a U-shaped recovery leading to low-single-digit revenue growth in 2025, which is notably lower than the consensus estimate of a 16% increase.
Lattice Semiconductor, which derives 47% of its revenue from the industrial and automotive sectors, has seen these markets continue to weaken. This trend aligns with broader industry data. However, the company's management did not express surprise over the developments. In response to the challenging environment, Lattice Semiconductor has reduced its workforce to better align with current market dynamics.
Despite the reduction in revenue forecasts, the company anticipates low-double-digit earnings per share (EPS) growth by 2025. This expectation is supported by a strategy to lower expenses. Management also expects improvements in EBITDA and free cash flow (FCF) margins, aiming to rise from the current low-to-mid 30% range.
Stifel's outlook for Lattice Semiconductor remains positive, with expectations that the company will eventually return to a 15% to 20% top-line growth rate as its new products gain more traction in the market. The firm's reiteration of the Buy rating reflects confidence in the company's long-term growth potential.
In other recent news, Lattice Semiconductor Corporation reported Q3 2024 financial results, revealing a revenue of $127.1 million, marking a 34% decrease from the previous year due to inventory normalization. Despite this, the company maintained a stable gross margin at 69% and has strategic plans for a U-shaped recovery and low single-digit revenue growth for 2025.
In efforts to enhance efficiency, Lattice implemented a 14% reduction in workforce and operating expenses, without compromising product integrity. CEO Ford (NYSE:F) Tamer highlighted the company's focus on executing its current roadmap, leading with low-power innovations, and targeting key product lines to reach its goal of $1 billion in revenue. These are among the recent developments for the company.
The firm also anticipates low single-digit growth for 2025, with a revenue projection of approximately $525 million. Management expects inventory levels to normalize by mid-2025, leading to a U-shaped recovery. The company maintains a long-term revenue growth target of 15% to 20%, with stabilization expected in 2024 before growth resumes in 2025.
InvestingPro Insights
Lattice Semiconductor's current market situation aligns with several InvestingPro Tips and metrics. The company's stock has taken a significant hit over the last six months, with a price total return of -26.83% during that period. This decline reflects the challenges mentioned in the article, particularly the weakening industrial and automotive sectors.
Despite these headwinds, InvestingPro data shows that Lattice Semiconductor remains profitable, with a P/E ratio of 38.17 and an adjusted P/E ratio of 36.6 for the last twelve months as of Q2 2024. This relatively high earnings multiple suggests that investors still have expectations for future growth, aligning with Stifel's long-term positive outlook.
An InvestingPro Tip indicates that analysts anticipate a sales decline in the current year, which corroborates the article's mention of lower revenue forecasts. However, another tip notes that the company has been profitable over the last twelve months, with a strong return over the last three months (16.82% price total return), suggesting some resilience in the face of challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Lattice Semiconductor, providing a deeper understanding of the company's financial health and market position.
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