Lattice Semiconductor Corporation (NASDAQ:LSCC) defied analyst predictions to release its quarterly results, which were ahead of market expectations. Lattice Semiconductor beat earnings, with revenues hitting US$103m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 16%. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Lattice Semiconductor after the latest results.
Taking into account the latest results, the most recent consensus for Lattice Semiconductor from ten analysts is for revenues of US$436.5m in 2021 which, if met, would be a meaningful 8.8% increase on its sales over the past 12 months. Statutory earnings per share are predicted to leap 39% to US$0.47. In the lead-up to this report, the analysts had been modelling revenues of US$437.3m and earnings per share (EPS) of US$0.49 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.
Despite cutting their earnings forecasts,the analysts have lifted their price target 10% to US$36.44, suggesting that these impacts are not expected to weigh on the stock's value in the long term. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Lattice Semiconductor, with the most bullish analyst valuing it at US$40.00 and the most bearish at US$23.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. One thing stands out from these estimates, which is that Lattice Semiconductor is forecast to grow faster in the future than it has in the past, with revenues expected to grow 8.8%. If achieved, this would be a much better result than the 0.6% annual decline over the past five years. Compare this against analyst estimates for the wider industry, which suggest that (in aggregate) industry revenues are expected to grow 9.6% next year. So while Lattice Semiconductor's revenues are expected to improve, it seems that it is expected to grow at about the same rate as the overall industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on Lattice Semiconductor. Long-term earnings power is much more important than next year's profits. We have forecasts for Lattice Semiconductor going out to 2022, and you can see them free on our platform here.
Even so, be aware that Lattice Semiconductor is showing 2 warning signs in our investment analysis , you should know about...
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