Cisco and Google Can Take This Hot Tech Stock Higher

This tech stock has been growing rapidly, and it has some really good catalysts in store.

May 13, 2014 at 11:00AM

Lattice Semiconductor (NASDAQ:LSCC) is one hot stock that you shouldn't miss. The maker of programmable chips is on a terrific run, driven by customers such as Cisco (NASDAQ:CSCO), China Mobile, and potentially Google (NASDAQ:GOOGL) (NASDAQ:GOOG). The stock price has also tagged along nicely with Lattice's terrific financial performance, shooting up around 44% so far in 2014. There was a minor blip early in April when the broad market sell-off took Lattice down, but that was more of an opportunity.

Showcasing rapid growth
When Lattice reported its first-quarter results in the last week of April, the company showed investors why it should be bought on pullbacks. Lattice shares leapt 8% after the company delivered solid results. Revenue was up 36% year over year to $97 million, while the bottom line jumped five-fold to $0.10 per share. The company's results were miles ahead of analysts' expectations of $89 million in revenue and EPS of $0.06. 

Lattice is on a dream run and its performance has been much better than industry peers Altera and Xilinx. Now, almost all companies in this industry have identical growth drivers, and they count both Cisco and China Mobile as clients. So, it all comes down to the product differentiation and efficiency that each company delivers to its clients in this industry.

So far, Lattice has done quite well for itself in this regard, which is why its revenue and earnings have been growing at a robust pace compared to peers. Its new products have gained solid traction, as revenue from new products in the first quarter increased more than 23% year over year. In addition, Lattice's revenue from legacy products was down 8% year over year. 

Product innovation to drive growth
Lattice's new products, such as iCE40 and ECP3, were in good demand in the consumer and communications end markets. Now, Lattice is working on a next-gen product, the ECP5 device, to keep its growth streak intact. The company has managed to multiply its single design wins at certain large OEM customers into multiple design wins across different platforms. As Lattice is continuously looking to innovate and accelerate the time to market for its customers, its solutions are being readily adopted.

It is because of such characteristics that Lattice has gained good ground with key customers such as Cisco and Google. On the previous conference call, management cited the Internet of Things as a major growth opportunity. This is not surprising, as Cisco has placed a $19 trillion figure on the potential of the Internet of Things by 2020, and the networking behemoth is now investing in start-ups to implement this concept. 

Cisco recently announced that it will be investing $150 million in early stage companies over the next three years as it looks to accelerate adoption of the Internet of Things. Since Cisco is now going all-out to connect various objects to the Internet, it is quite possible that the number of things connected to the Internet by 2020 might hit 212 billion, as predicted by IDC.

Given the huge number of devices that are expected to connect to the Internet in the coming years, the need for programmable chips should increase. This would lead to an increase in the addressable market for Lattice going forward.

The potential of Project Ara
Google is working on an ambitious plan to deliver the world's first modular smartphones for consumers, dubbed Project Ara. According to Paul Eremenko, the head of Project Ara, Google is trying to "lower the barrier-to-entry to the smartphone hardware ecosystem" through this venture. According to the Project Ara website, Google is targeting 5 billion people who don't yet have a smartphone, which could be a huge opportunity for Lattice. 

Ara will allow consumers to design their own smartphones, and the tech giant has chosen Lattice's field programmable gate arrays, or FPGAs, for its first prototype and reference module implementations. Google stated that is has selected Lattice because its FPGAs meet critical size, power, and performance requirements, apart from simplifying and speeding up development of the project's modules. 

Worth the premium
This is how Lattice is looking to differentiate itself from peers such as Xilinx and Altera. However, if you are keen on an investment in Lattice, be prepared to pay a premium. The stock trades at 29 times last year's earnings, more than Xilinx's multiple of 22 and Altera's 24. However, Lattice is the fastest-growing company of the lot, as far as its financials are concerned. So, the stock is worth the premium.

In addition, the company's new products are on a roll, and with big opportunities such as Project Ara and the Internet of Things ahead, Lattice's rise should continue.

A better investment than Lattice: Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Google (A shares). The Motley Fool owns shares of Google (A shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers