What Happened:
Shares of semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) fell 5.5% in the morning session after Intel and KLA Corporation reported earnings and provided underwhelming business projections for the first quarter of the year.
Intel guided revenue and non-GAAP EPS below expectations. The company attributed the weak guidance to "discrete headwinds" that affected business segments, including Mobileye, PSG (Programmable Solutions Group), as well as business exits. Similarly, KLAC's revenue and EPS guidance for the next quarter fell short of Wall Street's expectations. During the earnings call, management highlighted uncertainties in the resumption of growth in the WFE (Wafer Fab Equipment) business.
On a brighter note, both companies (Intel and KLAC) expect the projected weakness to bottom out in the first half of the year, with expectations for quarterly improvements in the rest of the year.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Lattice Semiconductor? Access our full analysis report here, it's free.
What is the market telling us:
Lattice Semiconductor's shares are quite volatile and over the last year have had 19 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago, when the company dropped 5.1% after a broader market downturn as the Dow fell for the third straight day amidst surging yields. The decline was influenced by stronger-than-expected December 2023 retail sales, up 0.6% from November 2023 (versus expectations for 0.4% growth), potentially challenging expectations of aggressive Federal Reserve rate cuts in 2024. This marked a shift from the more optimistic market sentiment at the end of 2023, as more market data revealed inflation is cooling. However, recent market pullbacks indicate increased uncertainty in 2024, suggesting caution as stocks might be overbought.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
Lattice Semiconductor is down 7.7% since the beginning of the year, and at $63.17 per share it is trading 35.1% below its 52-week high of $97.26 from August 2023. Investors who bought $1,000 worth of Lattice Semiconductor's shares 5 years ago would now be looking at an investment worth $8,340.
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