Rosenblatt analyst Jun Zhang noted that ZTE (ZTCOY) announced at the World 5G Convention in Beijing that they plan to procure 3 million 25G fronthaul optical modules in the first half of 2020. He also expects Huawei to begin ordering 5G related components this week, said Zhang, who views the procurement news as beneficial for Lumentum (LITE), Maxim (MXIM) and Macom (MTSI). HG Tech and Hisense hold the largest market share in China for supplying 25G fronthaul optical modules and both use lasers primarily from Lumentum and drivers primarily from Maxim and Macom, Zhang tells investors. He keeps a Buy rating on Lumentum and has no ratings on the two driver suppliers mentioned.
News For LITE;MXIM;MTSI;ZTCOY From the Last 2 Days
MKM Partners analyst Michael Genovese raised the firm's price target on Lumentum to $114 from $107 and keeps a Buy rating on the shares. The company's Q4 earnings beat was driven by optical comms and 3D sensing, while its margins expanded "sharply" on product differentiation, the analyst tells investors in a research note. Genovese adds that Lumentum has excellent products that are "significantly differentiated" in key areas such as "3D VCSELs, ROADMs, EML laser chips, and -ACO and -DCO modules."
B. Riley FBR analyst Dave Kang raised the firm's price target on Lumentum to $109 from $99 and keeps a Buy rating on the shares after the company reported Q4 revenue and EPS above consensus with an overall book-to-bill that was over 1. While he lowered his FY21 and FY22 EPS estimates to reflect lower sales estimates and higher expense assumptions, Kang is assigning the stock a bit of a higher multiple to reflect the multiple expansion of the optical group in recent months.
Craig-Hallum analyst Richard Shannon raised the firm's price target on Lumentum to $120 from $100 and keeps a Buy rating on the shares. The analyst notes that Lumentum continues to execute well in a favorable demand environment, as its strong EPS results and guidance suggest. While there are understandable questions about the sustainability of these trends and the impact of Huawei within it, Shannon sees a continued need for bandwidth in both cloud and telecom/wireless networks, and Lumentum's portfolio of high-end products with little competition are well-suited to address this need.
Stifel analyst John Marchetti raised the firm's price target on Lumentum to $105 from $93 and reiterated a Buy rating on the shares after the company reported Q4 earnings. The company delivered results and guidance which highlighted the strong underlying demand fundamentals in its optical business and an improved profitability model that should be sustainable over the long-term, Marchetti told investors in a research note. The analyst believes any future Huawei-related headwinds will be offset by growth from other Chinese vendors. He also noted the stock remains "best positioned" to capitalize on "strong" growth drivers.
"Strong market demand and solid execution drove better than projected results across all financial metrics in our fourth quarter, especially gross margin and EPS," said Alan Lowe, President and CEO. "We head into fiscal 2021 with demand increasingly driven by new products and technologies, strengthened market positions, and an improving financial model with accruing benefits from acquisition synergies. We became a standalone public company five years ago and since then have significantly improved our financial performance every year. While we have accomplished a lot over the past five years, I believe our future is brighter than ever."