SONY - Lumentum dips as Barclays downgrades citing 'one too many resets'

2023-05-10 07:19:29 ET

Lumentum ( NASDAQ: LITE ) shares slipped nearly 2% in pre-market trading on Wednesday as Barclays downgraded the photonic technology company, citing "one too many resets" after the company reported weak first-quarter results and guidance.

Analyst Tom O’Malley lowered his rating on Lumentum ( LITE ) shares to equal-weight from overweight, stating that he is struggling " to find a compelling reason to support the stock with no imminent positive catalyst and further risk to Telecom."

During the first-quarter, Lumentum ( LITE ) earned an adjusted 75 cents per share as revenue declined 3% year-over-year to $383.4M. Analysts were looking for earnings of 78 cents per share and $382.35M in sales.

Looking ahead, Lumentum ( LITE ) expects fiscal fourth-quarter sales to be between $350M and $380M, below the $391.16M consensus, with adjusted earnings per share between 45 and 65 cents, below the 78-cent consensus.

O'Malley added that the telecom business is dealing with persistent inventory digestion from Ciena ( CIEN ), with the expectation being the same for other customers. The datacom business fell 49% sequentially to $20M and is "likely" to end the calendar year flat, while commercial lasers "pressured" gross margins and is expected to remain weak into the second half of the year.

Lastly, the 3D sensing business, where it competes with Sony ( SONY ) and Coherent ( COHR ) is only expected to see a "moderate" step up in the second half.

"We see this as a combination of inventory digestion, Sony taking all [iPhone 15 Pro] world facing sockets, and some additional share loss to COHR (we model 30% share for front facing)," O'Malley added.

Coherent ( COHR ) shares fell 13% in pre-market trading on Wednesday after the company reported weak third-quarter results and a soft outlook for the rest of the year.

Analysts are largely cautious on Lumentum ( LITE ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates LITE a SELL .

More on Lumentum

• Lumentum ticks up as JP Morgan upgrades, citing overly pessimistic Wall Street
• Lumentum stock plunges as Rosenblatt downgrades after weak Q3 results
• Lumentum slides 9% on lowering Q3 expectations

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