On Tuesday, Needham, a financial services firm, adjusted its price target for Lantronix , Inc. (NASDAQ: NASDAQ:LTRX), a global provider of secure data access and management solutions for the Internet of Things (IoT). The share price target was reduced to $7.00 from the previous $8.50. Despite the cut in the price target, Needham sustained a Buy rating on the company's stock.
Lantronix disclosed its financial results for the second quarter of fiscal year 2024, which were in line with consensus expectations. However, the company significantly revised its revenue and earnings per share (EPS) guidance for the second half of fiscal year 2024 downward by 18% and $0.15 year-over-year, respectively. This revision was attributed to excess inventory and delays in certain projects.
The company's performance in the second quarter was bolstered by substantial shipments to Gridspertise and the electric vehicle manufacturer Togg. Revenues from Gridspertise are anticipated to climb in the second half of fiscal year 2024 but are expected to decrease in the first half of fiscal year 2025, eventually stabilizing as a regular business.
The downward adjustment in Lantronix's outlook has raised concerns about the durability of its core embedded IoT business. Saleel Awsare, the new CEO of Lantronix, plans to undertake a thorough review of the company's project pipeline in the upcoming quarter. Following this review, he intends to present an updated strategic outlook.
In spite of the lowered guidance, Needham forecasts that Lantronix will maintain a strong double-digit percentage operating margin starting from the March quarter. Consequently, the firm has substantially revised its fiscal year 2024 and 2025 estimates for Lantronix, along with the reduction in the share price target to $7.00.
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