Lumentum Faces Telecom Headwinds: Analysts Adjust FY24 Forecasts Amid Inventory And Demand Challenges

Several analysts revised the price target of Lumentum Holdings Inc LITE following its Q4 FY23 earnings reported yesterday.

The company reported revenue of $370.8 million, down 12.2% Y/Y, beating the consensus of $366.5 million. Adjusted EPS of $0.59 beat the consensus of $0.55.

Morgan Stanley analyst Meta A Marshall reiterated an Equal-weight rating and a price target of $55.

The analyst reduced Q1 and FY24 adjusted revenue estimates by 19% to $313.1 million and 15% to $1.425 billion, respectively.

Also, Marshall lowered adjusted EPS to $0.27 (from $0.52) for Q1 and $2.11 (from $3.33) for FY24.

The analyst lowered the estimates on ongoing telecom demand weakness and inventory digestion across the product portfolio.

Rosenblatt analyst Mike Genovese raised the rating to Buy from Neutral at a decreased price target of $62 from $67.

The analyst expects LITE's Datacom revenues to get a boost from booming demand for 800G Datacom transceivers led by AI.

The analyst notes the Q1 guidance, and implied Q2 outlook, are sharply lower than estimates due to the Telecom inventory correction.

Consequently, Genovese revised estimates for sales and EPS to $314.1 million (from $368.4 million) and $0.28 (from $0.57) for Q1, and $1.347 billion (from $1.579 billion) and $2.18 (from $3.41) for FY24.

Needham analyst Alex Henderson reaffirmed a Buy rating with a price target of $59.

The analyst expects a recovery in FY24 and builds on that in FY25, following weak telecom sector gross margins.

The analyst projects volumes to normalize and gross margins to rebound in FY24 and FY25. 

Henderson reduced the estimate for revenue and EPS to $1.371 billion (from $1.600 billion) and $2.06 (from $3.02) for FY24 and $1.690 billion (from $1.900 billion) and $4.21 (from $4.82) for FY25. 

Price Action: LITE shares are trading higher by 1.70% at $46.99 on the last check Friday.