Baird calls Lattice Semiconductor its top small-cap idea for 2019

Lattice Semiconductor Corporation (NASDAQ:LSCC) is winning plaudits from Baird Equity Research as analyst Tristan Gerra calls the Oregon company his “top small-cap idea” for 2019 and is raising his price target on the stock to $10 from $9 while sticking to an Outperform rating.

The reasons for Gerra’s bullishness about Lattice are its new management team, much-improved execution, margin expansion and secular drivers like servers, 5G and industrial automation.

“Upcoming stock drivers include end-market refocus, key customer re-engagement, predictable/steady new product roadmap, expense controls and mix shifts, next-generation FD SOI-based products among other steps improving customer fundamentals,” Gerra wrote in a note to investors.

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Headquartered in Hillsboro, Oregon, Lattice is a fabless supplier of proprietary field programmable gate arrays (FPGAs), field programmable system chips (FPSCs), and high-density complex programmable logic devices (CPLDs).

Investors are also keen on the company, sending Lattice shares up 16% to $9.50 before the opening bell on Wednesday, in the wake of the unveiling of its fourth-quarter results.

On the list of the company’s merits are its discipline on costs, with management moving to simplify the operating structure and focus on margin expansion and cost improvements. Lattice paid down $15 million of debt in the fourth quarter and plans to use excess cash to continue to pay down debt going forward.

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Key revenue drivers also lie ahead, as Lattice is likely to see benefits thanks to the shift to 5G networks and is also gaining traction in video bridging, advanced driver-assistance systems and infotainment systems. “Lattice has started to benefit from early deployments and expects revenue contribution to become material in the second half of 2019 and into 2020,” Gerra wrote.

Looking ahead, Lattice expects first-quarter revenue to fall between $94 million to $98 million.

In the fourth quarter, Lattice posted adjusted earnings of $0.08 per share on sales of $96 million. The results beat the expectations of analysts who had expected earnings-per-share of $0.08 on revenue of $95 million.

Contact Ellen Kelleher at [email protected]

Story by ProactiveInvestors