What Happened:
Shares of semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) jumped 5.9% in the morning session after semiconductor peer, Texas Instruments reported first-quarter results that topped analysts' revenue and EPS expectations, driven by strong performance in its analog segment. Looking ahead, next quarter's revenue guidance was above Wall Street's estimates. On the other hand, its gross margin fell, and its inventory levels increased. Overall, this was a decent quarter for Texas Instruments. The results likely suggest strong demand for semiconductors, as more companies report quarterly results in the new earnings season.
More specifically, Texas Instruments supplies power solutions for FPGAs--field programmable gate arrays. These customizable chips are LSCC's specialty, so Texas Instruments' earnings could suggest good things to come when Lattice reports. After the initial pop the shares cooled down to $70.41, up 3.6% from previous close.
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What is the market telling us:
Lattice Semiconductor's shares are somewhat 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 biggest move we wrote about over the last year was 6 months ago, when the stock dropped 13.7% on the news that the company reported third quarter results with revenue guidance for the next quarter roughly 10% below Wall Street's expectation before the quarter was reported. Lattice explained that the weak revenue forecast was due to reduced demand in communications infrastructure in Europe as well as industrial and automotive markets in Europe and Asia. While management believes in the long-term potential for their products, they cited high interest rates as a dampener to near-term demand. Management added on the earnings call that distributor and large end customer inventories remain healthy (high inventory levels could mean fewer future orders), but the market seems somewhat skeptical.
The semiconductor industry saw some choppy results during the earnings season, starting with bellwether Texas Instruments and continuing with ON Semiconductor.
On the other hand, revenue and EPS outperformed Wall Street's estimates, even if the beats weren't too big. Overall, the results could have been better.
Lattice Semiconductor is up 3.1% since the beginning of the year, but at $70.41 per share it is still trading 27.6% 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 $5,271.
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