SONY - Lumentum ticks up as JP Morgan upgrades citing overly pessimistic Wall Street

2023-04-17 07:37:15 ET

Lumentum ( NASDAQ: LITE ) shares rose more than 2% in premarket trading on Monday as investment firm J.P. Morgan upgraded the photonic technology company, noting that even though there are concerns about competition in the 3D sensing market, Wall Street is being overly pessimistic.

Analyst Samik Chatterjee raised his rating on Lumentum ( LITE ) shares to overweight from neutral and boosted the per-share price target to $60 from $54, noting that shares are trading below 11 times 2023 earnings and 8 times 2024 earnings, well below the historical average of 13 times.

Additionally, Chatterjee expects to see upside to earnings per share as the company uses its balance sheet to buy back stock, despite worries about lower revenues from Sony ( SONY ) entering the 3D Sensing market.

"To that end, we are risk-adjusting our revenue estimates further for potential share and revenue loss to Sony in 3D Sensing, but our earnings estimate for [fiscal 2025] rises on account of a higher likelihood of the company utilizing the flexibility on its balance sheet and the remaining $500 [million] of the buyback authorization to repurchase ~15% of the current market capitalization within a 2-year period," Chatterjee wrote in an investor note.

Chatterjee also noted that Lumentum ( LITE ) is seeing issues in the data communications, telecom and commercial lasers markets.

Earlier this month, investment firm Rosenblatt downgraded Lumentum ( LITE ) after it negatively pre-announced its third-quarter results .

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 TER a SELL .

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