Shares of Lumentum Holdings Inc (NASDAQ:LITE) tanked in early trading on Wednesday, after the company reported fiscal third-quarter (Q3) results.

Key Analyst Insights

• Rosenblatt Securities analyst Mike Genovese maintained a Buy rating, and raised the price target from $900 to $1,300.
• JPMorgan analyst Samik Chatterjee reiterated an Overweight rating, and lifted the price target from $950 to $1,130.

Check out other analyst stock ratings.

Rosenblatt Securities: Lumentum's revenues grew 90% year-on-year and 22% sequentially to $808 million. That’s in-line with expectations, Genovese said. The company achieved very strong margins, with a gross margin of 47.9% and an operating margin of 32.2%, exceeding Rosenblatt estimates by 320 basis points (bps) and 200 bps, respectively, he added.

Management projected revenues for the fiscal Q4 between $960 million and $1.01 billion. That represents more than 100% year-on-year growth at the midpoint, Genovese said. "Sequential growth is to be driven by Datacom laser chips, Cloud transceivers, and Telecom/scale across components," he further wrote.

Lumentum seems to be on track to meet or beat its target of hitting $1.25 billion in quarterly sales by year-end and $2 billion by the end of calendar year 2027.

JPMorgan: The company generated gross margin expansion on the back of strength in high-margin products, Chatterjee said. "Lumentum again raised the bar for other optical companies," projecting around $180 million in sequential revenue growth for its fiscal fourth quarter, despite supply constraints limiting upside in its Cloud Light (transceiver) and Datacom chips revenues, the analyst stated.

He added that the strong guidance underscores the company's momentum from:

• Robust demand for Telecom and DCI (Data Center Interconnect) products
• Transceiver demand from large customers
• Solid growth in OCS (optical circuit switches) revenues
• A potential ramp in CPO (co-packaged optics) revenues

Management guided to earnings of $2.85-$3.05 per share for the fiscal fourth quarter, higher than the consensus of $2.75 per share, Chatterjee further noted.

Price Action

Shares of Lumentum Holdings had declined by 7.9% to $916 at the time of publication on Wednesday.

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