Lumentum Set For Growth: Analysts See Strong Recovery Ahead With AI And Telecom Momentum

Lumentum Holdings Inc. LITE shares are trading higher after the company reported fourth-quarter results and several analysts raised the price target on the stock.

On Wednesday, the company reported net revenue of $308.3 million, beating the consensus of $300.8 million, and adjusted EPS of $0.06, which surpassed the street view of $0.03.

Lumentum expects first-quarter net revenue of $315 million – $335 million (vs. consensus of $312.57 million), adjusted operating margin of 0% – 3%, and adjusted EPS of $0.07 – $0.17 (vs. street view of $0.13).

Rosenblatt analyst Mike Genovese raised the price target to $69.00 from $65.00 with a Buy rating.

The analyst writes that despite trailing Coherent Corp. COHR, Innolight, and Fabrinet FN in 800+G AI transceivers, the company is well-positioned to catch up and achieve similar growth.

Genovese adds that Lumentum’s positive outlook on the Telecom market, which has been weak recently, mainly highlights ZR and ZR+ technologies driven by Web Scale customers.

Since ZR often replaces traditional DWDM systems for DCI applications, the analyst does not see LITE’s Telecom comments as beneficial for Telecom optical players.

Instead, they may pose a headwind for optical vendors primarily focused on Telecom customers, writes the analyst.

Genovese raised the revenue estimate to $1.58 billion (from $1.51 billion) for FY25 and $1.90 billion (from $1.82 billion) for FY26.

Moreover, Needham analyst Alex Henderson maintained a Buy rating and upped the price target to $70 (from $65).

The analyst writes that they expect CY25 to be a strong recovery year for the company, driven by growth in AI transceivers and EML/CW chips, which could see quarterly revenue jump from ~$111 million to $215 million.

The analyst adds that telecom demand seems to be bottoming out, with a rebound anticipated in late CY24/early CY25.

Henderson writes that the stock responded positively to Lumentum’s announcement of a major new AI transceiver customer, with more potential customer wins anticipated in the coming quarters.

The analyst raised EPS estimates to $1.60 from $1.26 for FY25 and $3.04 from $3.26 for FY26.

Investors can gain exposure to the stock via SPDR S&P Telecom ETF XTL and Syntax Stratified MidCap ETF SMDY.

Price Action: LITE shares are up 13.5% to $51.70 at the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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