Lattice Semiconductor Corporation

LSCC Details

Lattice Semiconductor Corporation (NASDAQ: LSCC) is the low power programmable leader. The company and its subsidiaries are involved in developing technologies and monetising by way of differentiated programmable logic semiconductor products, system solutions, design services, and licenses.

Financial Performance for the First Quarter Ended 2 April 2022 – (Q1FY22)

• Revenue stood at $150.5 million in Q1FY22, up 30% YoY, reflecting the fifth consecutive quarter of double-digit growth YoY and up 6% QoQ. Substantial revenue was led by strategic focus and expansion in secular growth markets, expanding product portfolio, and focus on execution.
• Gross Margin increased to 66.9%/67.7% for Q1FY22 on a GAAP/Non-GAAP basis versus 61.0%/61.7%, respectively, for Q1FY21.
• Achieved a 47% rise in operating cash flow in Q1FY22 versus Q1FY21 while executing the sixth consecutive quarter of share buybacks.
• Net Income grew to $0.26/$0.37 per diluted share for Q1FY22 on a GAAP/Non-GAAP basis versus $0.13/$0.22, respectively, for Q1FY21.

Source: Company Reports, Analysis by Kalkine Group

Key Updates

• On 6 June 2022, the company advised that it has grown its partnership with AMI to optimize its technologies to complement one another, focusing on helping server manufacturers and cloud service providers.
• On 10 May 2022, the company advised that it plans to host its virtual security seminar at the firmware level.

Outlook

The company anticipates revenue in the ambit of $153-$163 million for Q2FY22. The gross margin is projected to be 68% plus or minus 1% on a non-GAAP basis for Q2FY22. Also, the total operating expenses for Q2FY22 are expected to be within $48-$50 million on a non-GAAP basis.

Key Risks

The company is exposed to the impact of the COVID-19 pandemic on its business. Its global business exposes the company to several economic, legal, regulatory, political, and business risks. The company depends on a concentrated number of subcontractors to supply and fabricate silicon wafers and perform assembly and test operations for its semiconductor products. Moreover, it is susceptible to shortages in or increased costs of wafers and materials, which could unfavourably impact its gross margins and revenues.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Technical Overview

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The stock is trading lower than the average price of the 52-week low-high range at $43.59–$85.448, respectively.

The stock has been valued using P/E multiple based relative valuation (on an illustrative basis). The target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to peer average P/E multiple (NTM basis), considering its strong revenue growth, profit expansion in Q1FY22 and decent guidance for Q2FY22.

Considering the aforementioned factors, the current trading levels, we give a “Buy” recommendation on the stock at the closing market price of $47.76 per share, up 5.27% as of 14 June 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Lattice Semiconductor Corporation (LSCC) is a part of Kalkine’s Global Big Money Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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