Lumentum Declines 14% on Poor Q3 Guidance

Optical and photonic products provider Lumentum Holdings Inc. (LITE) has reported better-than-expected results for the fiscal second quarter, as both earnings and revenues surpassed expectations.

However, shares of the company declined 14.4% on Thursday due to the poor fiscal Q3 guidance provided by the company.

Revenues fell 6.7% year-over-year to $446.7 million but surpassed the consensus estimate of $445.4 million. This fall can be attributed to an 11.5% decline in revenues from Optical Communications segment, which contributed 89% towards the total revenues.

Adjusted earnings came in at $1.60 per share, down 13.5% from $1.85 per share in the year-ago quarter. The Street had estimated the same to be at $1.58.

Outlook

For the third quarter of fiscal 2022, the company expects to post net revenues in the range of $375 million to $405 million, negatively impacted by more than $65 million due to supply shortages. Also, adjusted EPS is anticipated to be between $1.01 and $1.19.

The President and CEO of Lumentum, Alan Lowe, said, “Looking beyond these near-term supply challenges, I am highly optimistic about our outlook and believe market inflections beneficial to us in all of our addressable markets will drive double-digit revenue growth in fiscal 2023 and beyond not including the pending acquisition of NeoPhotonics.”

Wall Street’s Take

Following the release, Rosenblatt Securities analyst Hans Mosesmann maintained a Buy rating on the stock and raised the price target to $115 from $105. The new price target implies upside potential of 33.2% from current levels.

Henderson said despite the prevailing headwinds impacting near-term outlook, constraints are expected to ease in the second half of 2022. Also, the analyst sees the NeoPhotonics acquisition to provide another leg of growth that is accretive for the company.

Consensus among analysts is a Strong Buy based on 9 Buys and 1 Hold. The Lumentum stock price prediction stands at $114.30 (upside potential of 32.3%).

Blogger Opinion

TipRanks data shows that financial blogger opinions are 100% Bullish on LITE, compared to the sector average of 71%.

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