Why Lattice Semiconductor Stock Soared Today
What happened
Shares of programmable chip-making company Lattice Semiconductor (NASDAQ: LSCC) surged 8.4% through 10:45 a.m. ET Tuesday after the company beat earnings estimates last night.
Analysts had expected Lattice to earn $0.44 per share, pro forma, on $166.3 million in sales for the third quarter of 2022. Instead, Lattice reported that its pro forma earnings were $0.48 per share, and its sales, $172.5 million.
So what
Sales soared 31% year over year in Q3, and Lattice tacked on a full 6 percentage points to its gross profit margin earned on those sales -- to 68.8%. Accordingly, after selling more chips and earning more money per chip sold, Lattice's profits jumped much faster than sales -- up 74% to $0.33 per share when calculated according to generally accepted accounting principles (GAAP).
Pro forma profits were up sharply as well, rising 71% to the aforementioned $0.48 per share.
Headlines have been dominated in recent months by reports of slumping sales of smartphones and PCs, hurting shares of higher-profile semiconductor companies like Nvidia and Advanced Micro Devices. Lattice's business, however, focuses on more mundane semiconductor chips used for industrial and automotive applications -- a section of the economy that's still struggling with supply shortages.
Result: Earnings were down in the most recent quarter for both Nvidia and AMD -- but earnings are still rising for Lattice.
Now what
And you can expect that to continue.
Guiding investors on what to expect in the fourth quarter of 2022, Lattice predicted sales will continue to grow to a range of $170 million to $180 million in the fourth quarter currently underway, up as much as 27% year over year. Gross margin will keep growing, too -- as high as 69.5%, or even higher, says management, which would work out to another 530-basis-point improvement, year over year.
Lattice may not have predicted a hard-and-fast earnings number for Q4, but analysts are forecasting $0.44 per share, up 37.5% year over year. At the rate Lattice is planning to grow sales and profit margins, though, that might be conservative.
Granted, at 46.8 times earnings, Lattice stock isn't exactly cheap right now. But if it keeps on beating earnings like it has been, a high stock price might be no obstacle to Lattice shares going even higher in the future.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.
