Lattice Semiconductor LSCC shares have lost 29% year to date (YTD), underperforming the broader Zacks Computer and Technology sector’s return of 25%.

It has also underperformed the Zacks Electronics- Semiconductors industry and peers, including Cirrus Logic CRUS, FormFactor FORM and Advanced Micro Devices AMD.

Over the same time frame, shares of Cirrus Logic, FormFactor and AMD have gained 49.1%, 7.3% and 6.3%, respectively. The industry appreciated 40.8% YTD.

In the trailing four quarters, LSCC’s earnings beat the Zacks Consensus Estimate once, missed once and matched twice, with the negative average surprise being 0.56%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Weak Automotive & Industrial End Markets Hurt LSCC

Lattice Semiconductor’s underperformance can be attributed to weakness in the Automotive and Industrial end markets as customers continue to reduce their inventory levels. Inventory normalizations and cyclic corrections are negatively impacting LSCC’s top-line growth.

Softness in Wireless Communication has been a major negative. 

In the first half of 2024, LSCC reported revenues of $265 million, down 41% from the year-ago period’s figure, primarily due to weaker demand in telecommunications infrastructure deployments and end customers rebalancing their inventory levels.

LSCC’s Q3 Guidance Not So Rosy

For the third quarter of 2024, LSCC expects revenues in the range of $117-$137 million. LSCC expects the inventory normalization cycle to continue through the second half of this year.

The Zacks Estimate for revenues stands at $127 million suggesting a year-over-year fall of 33.89%.

Gross margin is expected to be 69% (+/-1%) on a non-GAAP basis, which is in line with the year-ago quarter reported figure. 

For the third quarter of 2024, the Zacks Consensus Estimate for earnings is pegged at 24 cents per share, unchanged over the past 60 days. The figure indicates a year-over-year decline of 54.72%.

Portfolio Expansion to Aid LSCC’s Prospects

Lattice’s recent launches expand its product offerings, which might bode well for the stock.

The introduction of a 3D sensor fusion reference, Lattice Avant-E FPGA, designed to facilitate enhanced perception, robust reliability and simplified autonomous decision-making in complex environments, including Industrial robotics, Automotive and Smart City Infrastructure, is a major development.

The announcement of the Lattice MachXO5-NX family of advanced secure control FPGAs, offering crypto-agile algorithms, hardware root of trust features with integrated flash, and fail-safe remote field updates for reliable and secure product lifecycle management is a notable development.

The addition of the Certus-NX-28 and Certus-NX-09 to its FPGA portfolio, offering enhanced power efficiency, small size and reliability with flexible migration options is a plus. These are created to accelerate a broad range of communications, computing, industrial and automotive applications.

AI to Aid LSCC’s Prospects

Lattice Semiconductor products are utilized in a wide variety of AI applications, including device usage in AI-optimized servers in data centers, AI-enabled PCs, AI-enabled robotics and ADAS systems.

LSCC devices also aid in the control, management and security of the AI computing system like in the case of Edge AI-enabled applications, where LSCC solutions are used to run the AI inference algorithm, providing features like user presence engagement detection.

Additionally, for AI-enabled applications, Lattice Semiconductor’s solutions collect and preprocess sensor data that is used for AI processing. This is considered a positive move.

However, macroeconomic uncertainties and persistent inventory corrections are headwinds.

Zacks Rank and Valuation

LSCC reflects a stretched valuation at this moment, as suggested by a Value score of F.

LSCC stock is trading at a premium forward 12-month Price/Sales of 11.51X compared with the industry’s 6.92X.

Lattice Semiconductor carries a Zacks Rank #3 (Hold) at present, implying that investors should wait for a favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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