Research · Initiation · 7 October 2026
Lumentum Nasdaq: LITE
Lumentum is shipping behind demand for its lasers. At US$1,092, the shares already pay for the shortage to outlast the new factories.
The call No call
- Price at publication
- US$1,091.67close, 5 October 2026
- Target
- Noneno position at this price
- Conviction
- Medium
What would prove the thesis wrongLumentum's fiscal 2027 revenue, the year to June 2027, reaches US$6.8 billion or more with GAAP gross margin of 50 per cent or more in its fourth quarter, or the shares close above US$1,450 or below US$750 by October 2027.
What would turn this into a callA price below about US$860 or above about US$1,320; GAAP gross margin below 44 per cent in any quarter while revenue still grows; or revenue above US$1.6 billion in the December 2026 quarter with GAAP gross margin above 50 per cent.
Read the full notePDF, 6 pages: thesis, valuation, scenarios, risks and sources Open the modelExcel, live formulas: change an assumption and the target moves
The call in brief
- Lumentum makes the indium phosphide lasers that turn AI network traffic into light. Revenue more than doubled to US$1.01 billion in the quarter to June 2026, GAAP gross margin rose from 33.3 to 47.4 per cent, and it is still shipping behind demand.
- The claim is holding, and the margin shows scarcity: Lumentum names higher prices on some products as one cause. But the shortage has a timetable, as Lumentum expands its two Japanese fabs and converts a new US fab, and Nvidia funded Coherent, its closest rival, on the same day.
- At US$1,091.67 the shares trade at 52 times my fiscal 2027 earnings and 39 times my fiscal 2028. At 35 times, the price needs fiscal 2028 revenue of about US$9.1 billion, three times fiscal 2026, at today's margins.
- My call is no call, leaning short. Thirty-five times my fiscal 2028 estimate of US$28.28 gives about US$990, 9 per cent below the price, within a range of US$407 to US$1,474.
- Where I was wrong: my October piece said Nvidia paid Lumentum US$2 billion for lasers. It bought convertible preferred shares, now worth about US$3.1 billion; the lasers sit under a separate purchase commitment.