Lattice Semiconductor Corp: 5G Stock up 116% Since March, But Still Undervalued

Lattice Semiconductor Corp Poised for Near-Term Growth

Lattice Semiconductor Corp (NASDAQ:LSCC) is a 5G tech stock that’s been outperforming its peers.

Even with the September sell-off, Lattice Semiconductor stock is up 55% year-over-year, 53% year-to-date, and 116% since hitting March lows. It’s also been a tear over the last week, up more than 10% over the closing week of September.

Despite near-term volatility associated with fears that either President Trump or former Vice President Joe Biden would contest the results of the U.S. Presidential Election and of a second wave of the coronavirus quashing any economic growth, the outlook for LSCC stock remains bullish.

No matter what’s going on with the broader economy, 5G will continue to roll out, and tech stocks that support the 5G network and 5G phones will benefit. This includes LSCC.

Chart courtesy of StockCharts.com

LSCC Stock Overview

Lattice Semiconductor is the leading provider of low power programmable, smart, and connectivity technology. The company helps its 8,000 customers implement their own designs, lower development costs, and improve overall time-to-market. (Source: “Investor Presentation, Second Quarter 2020,” Lattice Semiconductor Corp, last accessed October 1, 2020.)

As the only company invested in small, low-power-field programmable gate array (FGAP) products, LSCC has gained a foothold in a lucrative, niche end market that includes Communications (5G wireless, switches/routers), Computing (servers, client), Industrial (Internet of Things, factory automation), Automotive (infotainment, advanced driver assistance), and Consumer (smartphones, wearables, smart homes, etc).

5G companies are attracted to FGAP because the integrated circuits can be programmed anywhere after being manufactured. This allows customers to customize integrated circuits for their own purposes.

Some of Lattice Semiconductor Corp’s customers include Amazon.com, Inc. (NASDAQ:AMZN), Cisco Systems, Inc. (NASDAQ:CSCO), Dell Technologies Inc (NYSE:DELL), Nokia Oyj (NYSE:NOK), Panasonic Corporation (OTCMKTS:PCRFY), and Sony Corp (NYSE:SNE).

Q2 Revenue Advances Sequentially Despite COVID-19

On July 28, LSCC announced that revenue, for the second quarter ended June 27, slipped 1.7% year-over-year, but was up three percent sequentially to $100.5 million. The second-quarter increase was a driven by strong demand in Communications and Computing. (Source: “Lattice Semiconductor Reports Second Quarter 2020 Results,” Lattice Semiconductor Corp, July 28, 2020.)

Net income was $10.6 million, or $0.08 per share, up 30.1% over first-quarter 2020 net income of $8.1 million, or $0.06 per share. It was also up 24.2% over second-quarter 2019 net income of $8.5 million, or $0.06 per share.

“Despite the challenging environment due to COVID-19, growth was led by strength in communications and computing, where we saw both sequential and year over year growth in 5G, servers and client computing,” said Jim Anderson, president and CEO.

Adding, “We are particularly pleased with our team’s product roadmap execution, as we delivered the Certus-NX™ launch as promised in Q2. We remain on track to achieve two additional key milestones in the second half of 2020 with our third Lattice Nexus™ product and the next installment in our software solutions portfolio.”

Analyst Take

Lattice Semiconductor stock has been on a great trajectory, advancing 180% in 2019. This momentum was only curbed by the coronavirus pandemic fuelled sell-off in March.

But LSCC stock has resumed its march higher; up 53% year-to-date and currently trading near record levels.

Going forward, Lattice Semiconductor Corp provided a solid outlook, expects to roll out two key product launches in the back half of 2020, and remains focused on profitability and cash generation. LSCC has made solid gains in 2020, but its outlook is even more robust.