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Technology Stocks : Lattice Semiconductor

LSCC 62.47

0.0%

1:59 PM EST

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To: Jim Tao who wrote (2)	2/19/1996 7:32:00 PM
From: E_K_S	of 339

I like this one too! Resistance at 32 1/4 and 34 5/8 with good upside target above 40! PE is low and balance sheet is solid. The stock needs to trade more volume at the 35-37 range before any break out to the up side. Remember there was new stock issued at the 37 range. This capital was used to purchase more FAB capacity for FY 97 and FY 98. Also Lattice needs to grow their high end business at a faster rate. Margins are much higher in this end of the business. According to their last quarterly report, the penetration of the high end business (high density gate arrays) only accounted for 18% of their sales. Their target is to generate 60% of their sales in this high end area. If they can accomplish this, we should see rapid growth in quarterly earnings. However, it appears that the company is slow to expand their high end product line and the next few quarters will tell how effective they are in meeting this objective. Finally, Lattice is building a marketing pressence in China and building their contacts for the future. This may also include participating in a FAB plant in the year 2000. My medium term price target is $50 by September 1996, IF they can show continued earnings growth over the next two quarters. Stock should earn $2.50 - $3.00 per share in 1996. At a low PE of 20 stock should be $50 - $60. Xlynx or Altera get a 45 PE based on their high growth and high margin products. If Lattice can expand its product line to more higher margin high density gate arrays, the market will raise the expected PE accordingly...maybe to 30! Altera just announced they are going to discontinue their low end gate array product line...Lattice may pick this business up as well during the short term.

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