Why Lattice Semiconductor (LSCC) Stock Is Trading Up Today
What Happened:
Shares of semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) jumped 6.2% in the morning session on continued upward momentum after the company reported fourth-quarter earnings. Specifically, earnings initially resulted in a decline in the stock. However, the market seems to have reacted positively to results after Lattice's management stated that underperformance in the quarter was due to temporary cyclical factors impacting the broader industry rather than company-specific headwinds. The company expects demand trends to inflect in the second half of 2024.
Additionally, management provided a clearer picture of its AI capabilities, giving specifical use cases of Lattice products in generative AI and ADAS (advanced driver assistance systems in new vehicles). The company even gave numbers, saying that current annual revenue from AI use cases is roughly $100 million (just over 13% of total revenue). This AI-related revenue is to "double in the next few years".
Also, while revenue guidance for the next quarter came in below expectations due to "cyclic correction and demand headwinds," management provided a timeline of when these challenges would normalize. Looking ahead, they expect things to inflect mid-year 2024 due to 1.) Inventory digestion and rebalancing observed in the first quarter of this year, which is expected to continue in Q2. 2.) New product ramps, which are expected to contribute more in the second half of the year. Overall, it was a promising quarter for the company, with the market encouraged by the additional insights provided on the AI front as well as the positive guidance for the back half of the year. After the initial pop the shares cooled down to $75.73, up 4.7% from previous close.
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What is the market telling us:
Lattice Semiconductor's shares are somewhat volatile and over the last year have had 19 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 19 days ago, when the company dropped 5.5% on the news that Intel and KLA Corporation reported earnings and provided underwhelming business projections for the first quarter of the year. Intel guided revenue and non-GAAP EPS below expectations. The company attributed the weak guidance to "discrete headwinds" that affected business segments, including Mobileye, PSG (Programmable Solutions Group), as well as business exits. Similarly, KLAC's revenue and EPS guidance for the next quarter fell short of Wall Street's expectations. During the earnings call, management highlighted uncertainties in the resumption of growth in the WFE (Wafer Fab Equipment) business. On a brighter note, both companies (Intel and KLAC) expect the projected weakness to bottom out in the first half of the year, with expectations for quarterly improvements in the rest of the year.
Lattice Semiconductor is up 10.6% since the beginning of the year, but at $75.73 per share it is still trading 22.1% below its 52-week high of $97.26 from August 2023. Investors who bought $1,000 worth of Lattice Semiconductor's shares 5 years ago would now be looking at an investment worth $6,581.
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