Lattice Semiconductor Corp: Huge Gains After Q2 Earnings Beat

Lattice Semiconductor Corp Outperforming Peers, Up 191% In 2019

Lattice Semiconductor Corp (NASDAQ:LSCC) is a robust tech stock that has been outperforming the majority of its peers and the broader semiconductor industry. Lattice Semiconductor stock has advanced by 191% in 2019 and by 24% since it reported second-quarter results on July 30 that topped Wall Street estimates.

Since the start of 2019, the Nasdaq has risen 22.5%, the S&P 500 has risen 18.1%, and iShares PHLX Semiconductor ETF (NASDAQ:SOXX) has risen 33.9%.

Even though Lattice Semiconductor stock has soared more than 190% in 2019, it still has plenty of room to run. The company surprised Wall Street, beating top- and bottom-line second-quarter estimates and reporting a solid outlook for the third quarter.

LSCC Stock Overview

Lattice Semiconductor Corp is the leading provider of smart connectivity technology to more than 8,000 global customers. The Hillsboro, Oregon-based company helps its customers implement their own designs, lower their development costs, and improve their time-to-market.

The company’s family of low-power, small devices has a strong foothold in growing markets, including 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). (Source: “Lattice Semiconductor: The Low Power Programmable Leader, Third Quarter 2019,” Lattice Semiconductor Corp, last accessed September 3, 2019.)

The company’s customers include Cisco Systems, Inc. (NASDAQ:CSCO), Dell Technologies Inc (NYSE:DELL), Nokia Oyj (NYSE:NOK), Panasonic (OTCMKTS:PCRFY, TYO:6752), and Sony Corp (NYSE:SNE).

(Source: “Lattice Semiconductor Corporation (LSCC),” Yahoo! Finance, last accessed September 3, 2019.)

Thanks to the “January Effect,” Lattice Semiconductor stock enjoyed early gains in 2019. The stock soared in mid-February thanks to strong fourth-quarter and year-end results, which included substantially improved profitability, earnings per share, and operating cash flow.

LSCC stock trended higher throughout the spring and summer and, as mentioned earlier, jumped further in late July on the heels of strong second-quarter results and a solid outlook.

Chart courtesy of StockCharts.com

Second-Quarter Earnings and Revenue Top Estimates

On July 30, Lattice Semiconductor Corp announced that revenue for its second quarter, ended June 29, slipped 0.4% year-over-year but advanced 4.3% sequentially to $102.3 million. (Source: “Lattice Semiconductor Reports Second Quarter 2019 Results,” Lattice Semiconductor Corp, July 30, 2019.)

Net income came in at $8.6 million, or $0.06 per share. In the second quarter of 2018, the company reported a net loss of $20.2 million, or a loss of $0.16 per share. Second-quarter 2019 net income was up 15.5% quarter-over-quarter from $7.4 million, or $0.05 per share.

Lattice Semiconductor Corp’s adjusted net income for the second quarter of 2019 was $21.0 million ($0.15 per share), a 70.4% increase from the $12.3 million ($0.10 per share) recorded in the same prior-year period and a 44.8% increase from the $14.5 million ($0.11 per share) recorded in the first quarter of 2019.

The company also generated $44.7 million in cash from operations and made a $40.0-million discretionary payment on debt.

Outlook

Looking ahead to the third quarter, Lattice Semiconductor Corp expects to report total revenue in the range of $101.0 to $105.0 million. At the midpoint, this represents a year-over-year growth of 1.5%.

The company forecasts a gross margin percentage of 59%, compared to 57.2% in the third quarter of 2018.

It also predicts total non-generally accepted accounting principles (GAAP) operating expenses of between $35.5 and $36.5 million, compared to $38.4 million in the same period last year

Analyst Take

Lattice Semiconductor Corp has had great momentum in 2019, thanks largely to its top- and bottom-line growth.

In its most recent quarter, the company reported its highest profitability level in more than a decade, a record-high operating income percentage, and improvements across key metrics like earnings per share.

In the not-so-distant past, Lattice Semiconductor Corp was running at a loss, but it is now generating cash. Furthermore, the company is regularly beating consensus. Over the last four quarters, it has topped both revenue and earnings estimates three out of four times.

Some investors may believe Lattice Semiconductor stock is overheating, but there is more than enough evidence to suggest it can continue much higher.