Venu
Position Trader, Market Leaders, Fundamental/Technical Analysis
Lumentum is a leader in AI optics, a critical piece of the AI infrastructure stack, with EPS expected to grow about 5x by 2029, from $8 to $45. Every new AI data center needs far more high-speed optical transceivers and fiber connectivity than traditional cloud, and bandwidth demand grows exponentially as clusters scale. The stock is reclaiming key moving averages while trying to break out of a multi-week bull flag. x.comÂ
Lumentum's FY28 EPS target of $40, given at Citi's TMT conference, far tops prior consensus on explosive, high-certainty demand for optical circuit switches and AI optics. Quarterly revenue passed $1.01B, up 109% year over year, and FY27 Q1 guidance of $1.225-1.275B hits $1.25B a quarter early as 800G ramps and 1.6T starts. Larger GPU clusters rely on optical links, and supply constraints keep Lumentum backlogged with pricing power; non-GAAP operating margin reached 36-40%. x.comÂ
Marvell risks paying a peak-scarcity price for Lumentum if optical supply catches up by 2028-30. The proposed ~$99B deal values Lumentum at roughly 20x guided annualized revenue and 58x estimated after-tax operating income, while Lumentum, Coherent and Chinese suppliers are adding laser capacity. The DSP-and-laser combination has strategic logic, but durable scarcity economics and Nvidia's response remain uncertain. x.comÂ
Lumentum is a great business, but at $954 its risk/reward is not attractive. Applying 30x to fiscal 2028 non-GAAP EPS of $40 gives a 2027 price target of $1,200, about 26% upside, or roughly 15% after adjusting for execution, financial, technology and supply risks. Reaching it needs on-time manufacturing ramps, sustained pricing power and cash flow without excessive dilution. Lost pricing power plus slipping OCS or laser ramps would break the thesis; a significant dip would offer a better entry. … Show more
Lumentum's 109% year-on-year growth and sold-out capacity through 2029 make selling its AI optics exposure questionable. Bloomberg reported Marvell is in advanced talks to buy it; the appeal depends on the price, especially when holders of an $80 billion Lumentum would become holders of a $320 billion-plus Marvell growing 37%. x.comÂ
Scale-up moving to optics adds demand for optical suppliers even if new AI architectures need fewer switches. Bigger data centers and more GPUs add to that need; Jensen Huang expects future optics requirements to be several orders of magnitude above what NVIDIA ships today. This challenges the optics bear case for Lumentum, Coherent, Tower Semiconductor and Credo. x.comÂ
Lumentum looks only slightly attractive, and only after another 10% drop, at about 24.5 times its guided $40 FY28 EPS at $980. Its upside is almost entirely driven by optical circuit switch demand from lead customer Google, which also points to a great 2027-2028 for fellow Google OCS supplier Huber+Suhner. Total OCS demand now exceeds the 8 million units first cited. x.comÂ
Lumentum stands to gain as the shift from copper to light inside AI data centers accelerates. Co-packaged optics is now in mass production, per TrendForce, with Nvidia shipping Spectrum-X CPO switches. Near-packaged optics is catching on fast; Lumentum CEO Michael Hurlston says its demand looks bigger than CPO's and came sooner, now late 2027 or early 2028. He sees about $40 a share of fiscal 2028 earnings power, above Street estimates, with none of CPO or NPO in the numbers yet. x.comÂ
Lumentum, Coherent and Applied Optoelectronics remain buys amid AI optics demand: Lumentum's CEO said its AI optical parts are completely sold out through early 2029. x.comÂ
Lumentum requires paying up heavily for a company that is not yet making money. Revenue grew 109% year over year, but it trades at about 25 times annualized sales, and it is growing less than memory makers at ten times their valuation. @ZeekTyt cites Lumentum's CEO expecting to supply only about 30% of requested laser demand as CPO and NPO ramp in 2027, with balance around 2029-30. x.com x.comÂ
Lumentum is an essential, bottleneck-constrained supplier to AI clusters as optics replace copper at its physical limit, not a commoditized transceiver vendor, so it remains undervalued with a path well above $1,000 a share. Per CEO Michael Hurlston, capacity is sold out. Gross margins are nearing 48%, backlog stretches through 2028 and Nvidia's $2B partnership runs through it. The shift to scale-up CPO and indium phosphide lasers and a reported US ban on Chinese data center sourcing favor it. … Show more