Lumentum Holdings (LITE): 3D Trumps China - Needham & Company

Needham & Company analyst, Alex Henderson, reiterated his Strong Buy rating on shares of Lumentum (NASDAQ: LITE) after ROADMs surprised with uncharacteristic softness in US and down sales in China. The analyst stated "we really had not expected this result. We had expected solid Q-Q growth in both Geos but particularly in China where it's a new product. We think this is a very temporary lull in a strong upward trajectory".

However, the analyst believes the "3D commentary dwarfs the rest of the news. LITE received and hopes to ship $200 million in CY172H. LITE continues to expect strong yields and is on track to deliver GM above 50% and Op Margins at 40%+. During the initial ramp, LITE is using a more conservative guide of 30% Op Margins as they aggressively spend to build capacity and deliver over a doubling 3D Revenues Q-Q until margins stabilize in CY18 at the richer level. Lumentum stated clearly: “we are right where we want to be on yield and are in fact ahead of target.” On the core optical business, LITE experienced the same slowdown in China as the rest of the industry and a bit of a wobble in the US Metro. We are trimming our expectations modestly but expect a rebound in CY4Q and in CY18".

No change to the price target of $80.

For an analyst ratings summary and ratings history on Lumentum click here. For more ratings news on Lumentum click here.

Shares of Lumentum closed at $57.40 yesterday.

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