Loop Capital starts on Lattice Semiconductor with ‘buy’ rating

Investing.com -- Loop Capital initiated coverage ofLattice Semiconductor Corporation (NASDAQ: LSCC) with a Buy rating and an $85 price target, citing the company’s potential for significant market share gains in the programmable logic IC space and improving margins.

The brokerage highlighted Lattice’s expansion into the mid-size field programmable gate array (FPGA) market and the disruption at a leading FPGA vendor as key growth catalysts.

Loop Capital also pointed to the company’s margin expansion opportunities, driven by a greater mix of FPGAs shipping with system-level software, a streamlined operating expense structure, and cyclical tailwinds.

Lattice (OTC: LTTC) is expected to benefit from a shift in the semiconductor landscape, where smaller FPGAs are increasingly being used as alternatives to application-specific integrated circuits (ASICs) and application-specific standard products (ASSPs).

The firm sees Lattice capturing more market share in the low- and mid-tier FPGA segments as larger competitors focus on high-end applications.

Loop Capital projects gross and operating margins of more than 70% and 40%, respectively, up from 67% and 25% in fiscal 2024. The firm noted that newer product lines like the Avant mid-sized FPGA family could provide a significant pricing uplift, with some products commanding as much as a 20x increase in average selling prices.

On the cyclical front, Loop Capital believes Lattice’s revenue bottomed in the fourth quarter of 2024 and expects a U-shaped recovery through fiscal 2025.

The firm anticipates low-single-digit percentage growth in 2025, with the potential for Lattice to exceed its long-term revenue growth target of 15-20% in 2026.

Loop Capital’s $85 price target is based on Lattice trading at 43 times its base-case fiscal 2027 EPS estimate, noting that some investors may find this valuation aggressive but emphasizing the company's scarcity value in the FPGA space.

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