On Thursday, Raymond James shifted its stance on Lattice (OTC:LTTC) Semiconductor (NASDAQ:LSCC) stock, raising the rating to Outperform from Market Perform. The firm also set a price target for the company's shares at $50.00, indicating a positive outlook on the stock's potential performance.
The upgrade comes after the analyst's assessment that the cyclical correction affecting the semiconductor industry is likely coming to an end. This view is supported by expectations of upward revisions to the company's performance projections in the coming quarters.
The analyst noted that Lattice Semiconductor's Industrial/Auto segment, which saw a 50% year-over-year decline in the second quarter, is anticipated to experience a gradual recovery due to inventory normalization, despite mixed end demand signals.
Additionally, the company's Communications/Computing segment is reported to have fared better, benefiting from content gains in servers. This trend is expected to persist and even expand into 2025 and beyond.
The new Avant product line, despite a slow start, is projected to contribute to growth, with even a modest market share increase in the mid-range market potentially driving an additional 2-3 percentage points of growth in 2025 and 2026.
The analyst also highlighted potential benefits for Lattice Semiconductor from Xilinx (NASDAQ:XLNX)'s discontinuation of low-end products, which could serve as a tailwind for the company in 2025.
Competition concerns, particularly regarding server market share against competitors like ASPEED on Intel (NASDAQ:INTC) platforms, were downplayed. The expanding opportunities in AI servers are believed to more than compensate for any potential share shifts.
In conclusion, the analyst expressed confidence that the recent pullback in Lattice Semiconductor's stock price represents a compelling buying opportunity, leading to the upgrade to Outperform.
In other recent news, Lattice Semiconductor has experienced a series of financial adjustments following their second-quarter results. Both Needham and TD Cowen have maintained a Buy rating on the company, albeit with lowered price targets of $61 and $60 respectively, due to the company's earnings per share of $0.23, which fell short of the expected $0.24 consensus.
Similarly, CFRA and Stifel have revised their price targets to $50 and $55 respectively, maintaining a Hold rating on Lattice Semiconductor shares.
These adjustments come in the wake of Lattice Semiconductor's reported 35% year-over-year decrease in sales, particularly in the industrial and automotive sectors. Despite these challenges, the company has launched new products like the Lattice MachXO5D-NX and the Lattice Sentry solution stack, which are expected to contribute to future growth.
According to recent reports, Lattice Semiconductor's management has demonstrated resilience, maintaining a steady gross margin of 69% and focusing on cash flow. Analysts from firms such as Needham and CFRA anticipate improvements in the second half of the year, driven by ongoing inventory normalization and new product introductions.
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 Raymond James' optimistic upgrade of Lattice Semiconductor (NASDAQ:LSCC), current InvestingPro data and tips provide additional context for investors considering this stock. The market capitalization stands at $5.76 billion, reflecting the company's significant presence in the semiconductor industry. Despite a challenging period, with revenue showing a decline of 13.17% over the last twelve months as of Q2 2024, the company maintains a strong gross profit margin of 69.22%, indicating effective cost management and a solid business model.
InvestingPro Tips suggest caution due to the stock being in oversold territory, as indicated by the RSI, and note that analysts have revised their earnings expectations downwards for the upcoming period. However, the company's financial health appears stable, with liquid assets exceeding short-term obligations and cash flows that can sufficiently cover interest payments. This financial resilience could be a key factor for investors looking for stability in a volatile market. Notably, the stock is trading near its 52-week low, which may align with the analyst's view of the current stock price dip as a buying opportunity.
For those seeking a deeper dive into Lattice Semiconductor's prospects, InvestingPro offers a wealth of additional tips—there are 21 more listed on the platform, providing a comprehensive analysis for informed investment decisions.
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