On Tuesday, Baird adjusted its price target for Lattice (OTC:LTTC) Semiconductor (NASDAQ:LSCC) shares, bringing it down to $44.00 from the previous $70.00. Despite the significant decrease, the firm maintained its Outperform rating for the company's stock.
The revision follows Lattice Semiconductor's announcement of a considerably reduced revenue forecast for 2025 and a decline in gross margin for the fourth quarter. According to the Baird analyst, this adjustment serves as a painful but necessary recalibration of expectations.
The analyst noted that booking visibility suggests a potential initial revenue rebound in the first quarter of 2025, which could imply that the fourth quarter may represent the lowest point in earnings.
Looking ahead, the analyst anticipates a recovery in the company's top line, a stabilization of gross margins, and reduced operating expenses, which are expected to contribute to an earnings per share (EPS) rebound in 2025. The report acknowledges that the trajectory of the recovery and gross margins are still significant risks for the company.
The analyst also highlighted that Lattice Semiconductor's traction in artificial intelligence (AI) and the quantification of these growth areas, in addition to the development of its Avant product, are seen as potential catalysts for the stock in the future. Despite the near-term challenges, the Outperform rating reflects the analyst's positive outlook on the company's prospects.
In other recent news, Lattice Semiconductor Corporation reported Q3 2024 financial results, revealing a revenue of $127.1 million, 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.
Stifel maintained a Buy rating and $55.00 price target for Lattice Semiconductor, expressing confidence in the company's long-term growth potential. Lattice Semiconductor also announced a 14% reduction in workforce and operating expenses to enhance efficiency without compromising product integrity.
The company aims for $1 billion in revenue, focusing on Edge AI and low-power FPGA solutions. Lattice Semiconductor 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. These are among the recent developments for the company.
InvestingPro Insights
Recent InvestingPro data paints a nuanced picture of Lattice Semiconductor's financial health, complementing Baird's analysis. Despite the lowered price target, the company maintains a solid market capitalization of $7.15 billion. The stock's P/E ratio of 38.17 and Price to Book ratio of 10.23 suggest a premium valuation, aligning with InvestingPro Tips indicating that LSCC is trading at high earnings and valuation multiples.
The company's revenue for the last twelve months stands at $562.58 million, with a concerning revenue growth decline of -24.23% over the same period. This decline supports Baird's cautious outlook and the need for recalibration of expectations. However, Lattice Semiconductor's gross profit margin remains robust at 68.9%, indicating strong pricing power despite market challenges.
InvestingPro Tips highlight that while 11 analysts have revised their earnings downwards for the upcoming period, the company is expected to remain profitable this year. This aligns with Baird's expectation of an earnings rebound in 2025. Additionally, LSCC's strong return over the last three months (16.82% price total return) suggests that investors may be anticipating the recovery mentioned in the analyst report.
For investors seeking a more comprehensive analysis, InvestingPro offers 17 additional tips for Lattice Semiconductor, providing deeper insights into the company's financial position and market performance.
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