Yahoo Finance Lattice Semiconductor (NASDAQ:LSCC) Reports Weak Q2, Stock Drops
Semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) missed analysts' expectations in Q2 CY2024, with revenue down 34.7% year on year to $124.1 million. Next quarter's revenue guidance of $127 million also underwhelmed, coming in 10.9% below analysts' estimates. It made a non-GAAP profit of $0.23 per share, down from its profit of $0.52 per share in the same quarter last year.
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Lattice Semiconductor (LSCC) Q2 CY2024 Highlights:
Revenue: $124.1 million vs analyst estimates of $130.2 million (4.7% miss)
Adjusted Operating Income: $31.53 million vs analyst estimates of $34.85 million (9.5% miss)
EPS (non-GAAP): $0.23 vs analyst expectations of $0.24 (4.5% miss)
Revenue Guidance for Q3 CY2024 is $127 million at the midpoint, below analyst estimates of $142.5 million
Gross Margin (GAAP): 68.3%, down from 69.7% in the same quarter last year
Inventory Days Outstanding: 235, up from 195 in the previous quarter
Free Cash Flow of $14.78 million, down 43.4% from the previous quarter
Market Capitalization: $7.57 billion
Esam Elashmawi, Interim Chief Executive Officer & Chief Strategy and Marketing Officer, said, "Second quarter 2024 results reflect the impact of cyclic industry headwinds. While the industry continues to go through a period of inventory normalization, we are starting to see signs of improvement. We continue to execute on our ongoing product portfolio expansion and remain well positioned for long-term growth."
A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.
Processors and Graphics Chips
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth
Lattice Semiconductor's revenue growth over the last three years has been mediocre, averaging 13.6% annually. This quarter, its revenue declined from $190.1 million in the same quarter last year to $124.1 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Lattice Semiconductor had a difficult quarter as revenue dropped 34.7% year on year, missing analysts' estimates by 4.7%. This could mean that the current downcycle is deepening.
Lattice Semiconductor's revenue growth has slowed over the last three quarters and its management team projects revenue to fall next quarter. As such, the company is guiding for a 33.9% year-on-year revenue decline, but Wall Street thinks there will be a recovery next year. Analysts' estimates call for 4.6% growth over the next 12 months.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Lattice Semiconductor's DIO came in at 235, which is 85 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Lattice Semiconductor's Q2 Results
We struggled to find many strong positives in these results. Its revenue and EPS both missed Wall Street's estimates. Looking ahead, guidance for next quarter's revenue also missed analysts' expectations. Overall, this was a mediocre quarter for Lattice Semiconductor. The stock traded down 10.3% to $49.25 immediately after reporting.
Lattice Semiconductor may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
