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 monetizing by way of differentiated programmable logic semiconductor products, system solutions, design services, and licenses.

Decent Financial Performance in Q4FY21 and FY21 (For the Period Ended 1 January 2022)

• Revenue grew 26.3% YoY in FY21 to $515.3 million, primarily driven by the strong product portfolio and growth in key end market segments.
• Gross Margin increased to 64.2% for FY21 versus 65.1% for Q4FY21 on a GAAP / Non-GAAP Basis, from 60.5%/61.6%, respectively, for Q4FY20
• Net Income increased to $0.20 / $0.32 Per Diluted Share for Q4FY21 on a GAAP / Non-GAAP Basis, Compared to $0.11/$0.19, respectively, for Q4FY20
• For FY21, the company has generated 83% higher cash flow from operations than the previous year and has repurchased $70 million of the company's shares.

Source: Company Reports, Analysis by Kalkine Group

Key Updates

• On 17 March 2022, the company announced the plan to showcase the capabilities of its Lattice sensAI™ solution stack and low power FPGAs at the coming tinyML Summit 2022.
• 15 March 2022, the company announced the expansion of Lattice mVision™ Solution Stack with capabilities to deliver flexible interface bridging and elevated quality image signal processing (ISP) performance.

Outlook

The management is content with the company’s robust revenue growth and profit expansion in Q4FY21, as LSCC stays focused on implementing its financial model. Further, the management remains excited about FY22 as the company further executes its long-term strategy and develop momentum across its customer base. Notably, the company has been guided to achieve revenue in the range of $141 million and $151 million in Q1FY22. The gross margin percentage is anticipated to remain at 66% plus or minus 1% on a non-GAAP basis. Moreover, the company forecasts total operating expenses of between $46 million and $48 million on a non-GAAP basis for Q1FY22.

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 price has delivered a 6-month and one-year return of ~-19.27% and ~+5.06%, respectively. The stock is trading lower than the average price of the 52-week low-high range at $42.94–$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 and profit expansion in Q4FY21 and decent guidance for Q1FY22.

Considering the factors above, we give a “Buy” recommendation on the stock at the closing market price of US$51.71 per share, down by 5.31% as of 6^th April 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.