Jonah Lupton
CEO & CIO of FirstWave Capital, Long-Biased Growth
Lumentum's CEO said at Deutsche Bank's tech conference that it can earn $40-plus of EPS in FY2028 after a huge uptick in its order book. That is nearly 5x the $8.67 earned in FY2026 within two years, and well above the sell side's $33 FY2028 estimate, so the stock should have risen around 10% on it. 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
Applied Optoelectronics looks undervalued if its capacity converts into the modeled revenue ramp. From disclosed capacity, quarterly revenue could rise from $858M in Q1 2027 to $1.89B in Q4 and $2.14B in Q1 2028, against a $6.8B market cap. A $7.5B annualized exit rate in 2027 at 40% gross margins would make an unchanged valuation surprising. Lumentum's capacity agreements into 2030-31 suggest demand may last beyond 2027-28, but execution risk remains. 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
Owning Lumentum's laser fab could secure Marvell's FY28 supply and hedge its DSP franchise as optical links shift to CPO. The rumored deal's strategy makes sense, but short-term pain is likely: at a 30% premium, roughly $17.5B in new debt and the rest in stock, rough math puts EPS dilution near 15%. It turns accretive only if Lumentum outgrows Marvell at today's guided rates for five or six more quarters, which looks achievable while the laser shortage lasts. x.com x.com x.comÂ
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
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
Marvell's potential Lumentum acquisition may fail to increase per-share value because the added profits may not cover dilution and financing costs. A simplified calculation using reported market values implies roughly 38%-45% more shares, requiring about 45% more combined net profit to preserve EPS; debt would add interest and repayment pressure. If the price already reflects future growth, a control premium and possible customer concerns add risk. x.comÂ
Lumentum's valuation is supported by Nvidia's co-packaged optics scale-out progressing faster than expected. Spectrum-X CPO switches are in mass production on better component yields, with shipments forecast at 15k in 4Q26 rising to 100k in 2027. CPO and NPO are seen contributing 12% and 26% of Lumentum's revenue in 2027 and 2028. Scale-up optical engine estimates were revised to 6.5m and 42m for 2027 and 2028, with full NPO adoption for the cycle retained. 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 breakout to a record weekly close, up 15.3% and erasing five months of chop in one week, is backed by revenue growing 109% year over year rather than hype. x.comÂ
