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Valued at $4.4 billion by market cap, Lumentum Holdings (LITE) is a key player in artificial intelligence (AI) infrastructure. As a manufacturer of specialized optical networking communication products, the company works with hyper-scalers to provide high-capacity solutions at scale for AI data centers.
Mid-cap LITE has edged out the broader equities market with its solid price performance. The shares have gained 23.3% on a YTD basis, and 67.6% over the past 52 weeks.
Lumentum Outperforms Estimates
Lumentum posted its fiscal fourth-quarter results in mid-August, which beat expectations. LITE's Q4 loss totaled $252.2 million, or $3.72 per share, though the profit of $0.06 per share on an adjusted basis beat the consensus. Revenue of $308.3 million was down 16.9% year over year, but still surpassed estimates.
At the end of the fiscal year, total cash and cash equivalents totaled $887 million, up by $16.1 million from the end of Q3.
“We exceeded our guidance midpoints for revenue and EPS in the fourth quarter. We booked record orders for datacom chips used in data center applications and saw emerging positive trends in the broader traditional networking market," said CEO Alan Lowe in a statement accompanying the results. We are making significant progress executing our strategy to broaden our cloud and AI customer base, which will lead to accelerated growth in the calendar year 2025.”
Management guided for first-quarter 2025 revenue in the range of $315 million to $335 million, higher than the average analyst forecast of $311.4 million, while the midpoint adjusted EPS guidance of $0.12 matched expectations.
LITE is due to report quarterly earnings again on Nov. 7, after the close of trading. Wall Street is targeting GAAP profitability for LITE in fiscal year 2025, ending in June.
Analysts Are Bullish on LITE Stock
In a recent note, LITE was one of only two semiconductor stocks to get a price target hike from Susquehanna analyst Chris Rolland. While the analyst says AI-focused semis appear to be in good shape, with the brokerage firm anticipating a continued capex ramp for hyper-scalers and data centers, Rolland observed that the bar is already set relatively high for many names in the group.
As a result, while Rolland cut his targets on big names like Qualcomm (QCOM) and Microchip Technology (MCHP), the analyst raised his price target on LITE from $70 to $80, suggesting an upside potential of nearly 24%.
With 15 analysts in coverage, LITE has a consensus “Moderate Buy” rating, alongside a mean price target of $61.40 - a slight discount to today's closing price.
However, valued at a reasonable price/earnings to growth (PEG) ratio of 1.16, this under-the-radar data center stock could have room to run higher from current levels.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
