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Investing.com - Barclays downgraded Lumentum (NASDAQ:LITE) from Overweight to Equalweight on Monday, while maintaining a price target of $165.00. The stock currently trades at $164.77, having delivered an impressive 96% return year-to-date.
The investment bank cited valuation concerns for the downgrade, noting that Lumentum stock is currently trading at 27 times earnings compared to its five-year median of approximately 14 times, suggesting limited upside potential. According to InvestingPro data, the stock’s current P/E ratio stands at 445.95x, with multiple valuation metrics suggesting significant overvaluation.Want deeper insights? InvestingPro offers 13+ additional tips and comprehensive valuation metrics for Lumentum.
Despite the rating cut, Barclays acknowledged potential short-term upside to consensus estimates, indicating Lumentum could reach its $600 million quarterly revenue target in March, earlier than previously anticipated. The company has demonstrated strong revenue growth of 21.03% over the last twelve months, with a healthy current ratio of 4.37 indicating solid financial stability.
The research note highlighted that Lumentum’s module business is currently consolidated to three major customers—Google, Microsoft, and Oracle—though ramping up production still requires time, with more significant contributions expected for 1.6T technology in 2027.
Barclays also mentioned increasing supply in Lumentum’s EML (Electro-absorption Modulated Laser) business, though it cautioned that overall growth numbers are limited in how quickly they can accelerate.
In other recent news, Lumentum Holdings Inc. has made several noteworthy announcements. The company has priced $1.1 billion of convertible senior notes due in 2032, aimed at qualified institutional buyers. These notes will bear an interest rate of 0.375% annually, with an option for initial purchasers to acquire an additional $165 million in notes. On the technology front, Lumentum expanded its Optical Circuit Switch product line by introducing the R64 platform, designed for AI data centers. This new platform offers significant power efficiency, consuming less than 150 watts while handling over 100 terabits per second of optical traffic. Analyst activity has also been favorable, with Aletheia Capital initiating a Buy rating on Lumentum, citing its strong position in the AI connectivity market. Additionally, Rosenblatt has raised its price target for Lumentum from $150 to $225, maintaining a Buy rating and highlighting the company as a top idea for 2025. These developments reflect Lumentum’s strategic moves in both financial and technological arenas.
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