Deutsche Bank Sees Attractive Entry Point In Lattice Semiconductor, Initiates With Buy And $70 Target

Deutsche Bank initiated coverage on the shares of Lattice Semiconductor Corp LSCC with a Buy rating and announced a price target of $70.

Founded in 1983 and publicly traded since 1989, LSCC specializes in the design of field programmable gate arrays (FPGAs). 

While larger FPGA makers like Altera and Xilinx focus on the high power/high ASP/low volume market, LSCC has historically focused on low power/lower ASP/high volume small FPGAs, notes the analyst.

LSCC products serve the Industrial and Automotive (~58% of FY23E sales), Communications and Computing (~36% of FY23E sales), and Consumer/Other (6% of FY23E sales) end markets.

According to the analyst, LSCC has seen a dramatic improvement in the pace of revenue growth, quality of revenue mix, and profitability/cash generation after Jim Anderson took over as President and CEO.

LSCC is reaping the benefits of the structural transformation and looks to boost growth further by entering into new markets.

Despite macro weakness in the near-term, the analyst is confident in the company’s ability to return to its target +15%-20% revenue CAGR through-cycle driven by new product introductions.

The analyst expects the LSCC to remain disciplined on operating expenditures while still investing in both its technology roadmap and its go-to-market channels, ultimately yielding operating/FCF margins at the high end of peers.

The analyst views current valuation levels as an attractive entry point and believes the risk-reward on this name skews favorably.

Price Action: LSCC shares are trading lower by 1.68% at $58.07 on the last check Thursday.

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