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Yahoo
11-07-2025
- Business
- Yahoo
This Underrated Artificial Intelligence (AI) Stock Is Crushing the Market, and It Could Skyrocket Higher
Surging demand for optical components in AI data centers has helped Lumentum record solid growth. Analysts expect Lumentum to maintain healthy growth levels over the next couple of years. Despite the stock's strong recent gains, it continues to trade at an attractive valuation. 10 stocks we like better than Lumentum › The tech-heavy Nasdaq Composite index has been in turnaround mode for the past three months -- up an impressive 31% over that span after a rocky start to the year. That's not surprising, as strong quarterly results from major technology companies seem to have boosted investor confidence in the sector. Lumentum Holdings (NASDAQ: LITE) has been one of the beneficiaries of the tech stock rally. Shares of the company, which sells optical and photonic products that go into data centers and telecom networks to enable fast data transmission, have shot up by an impressive 75% in the past three months, putting them back within 10% of the peak they reached in January. The good part is that Lumentum's rebound wasn't just a function of the broader market's rally, but also because of the company's healthy growth, which is being powered by its customers' increasing investments in artificial intelligence (AI) infrastructure. Better still, this stock is likely to deliver more upside to investors. Lumentum is witnessing terrific demand for its externally modulated lasers (EMLs), which are widely deployed in high-speed optical communications applications such as data centers and telecom networks. Their ability to transmit data over long distances at high speeds makes them ideal for deployment in AI data centers. On Lumentum's May earnings call, CEO Michael Hurlston noted: "We set another record for EML chip set shipments this quarter and remain on track to more than double this business by the end of calendar 2025." At the same time, the company is going to further expand its production capacity of EMLs in an effort to meet the end-market demand. That's the smart thing to do, considering that according to market research firm LightCounting, the optical transceiver market is expected to generate $10 billion in revenue in 2026 -- as compared to $5 billion in 2024 -- before rising to $20 billion in 2030. The company's revenue in its fiscal 2025 third quarter increased by 16% year over year to $425.2 million. Its adjusted earnings per share jumped by more than 500% -- from $0.09 to $0.57 -- on the back of an improvement in manufacturing utilization rates as well as the higher margins of its laser components deployed in AI servers. Analysts' consensus estimates are for a 20% increase in Lumentum's revenue this year to $1.6 billion. Importantly, its top-line growth is expected to remain solid next year as well, thanks to the improving demand for AI-focused optical components. Even better, that top-line growth is expected to filter down to the bottom line as well. The analysts are forecasting a 94% increase in earnings in the current fiscal year to $1.96 per share. That won't be surprising when we take into account the margin gains that its laser components deployed in AI data centers are delivering. What's worth noting is that Lumentum is trading at an incredibly attractive valuation despite the impressive growth that it has been clocking. It has a forward earnings multiple of 24, which is lower than the tech-laden Nasdaq-100 index's average forward price-to-earnings ratio of 29. Even assuming Lumentum continues to trade at a discount to the broader index after a couple of years, if it delivers the healthy earnings growth that analysts are anticipating, its stock could fly higher. Based on a P/E ratio of 24, its projected earnings of $5.21 per share in its fiscal 2027 point toward a stock price of $125. That would be 37% above the current level. However, don't be surprised to see this AI stock jumping higher than that, as the market could reward it with a premium multiple thanks to its strong earnings growth. That's why even after its impressive rebound over the past three months, investors should consider buying Lumentum before it possibly flies even higher. Before you buy stock in Lumentum, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Lumentum wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $674,432!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,005,854!* Now, it's worth noting Stock Advisor's total average return is 1,049% — a market-crushing outperformance compared to 180% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of July 7, 2025 Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy. This Underrated Artificial Intelligence (AI) Stock Is Crushing the Market, and It Could Skyrocket Higher was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-05-2025
- Business
- Yahoo
This Incredibly Cheap Artificial Intelligence (AI) Stock Could Jump 8% as per Wall Street Analysts, But Don't Be Surprised to See It Soar Higher
The rapidly growing demand for high-speed data transmission is turning out to be a tailwind for this optical components supplier. The company delivered impressive growth in its revenue and earnings last quarter, and the trend is expected to continue. The robust growth in this tech stock's earnings and its cheap valuation are reasons why investors should consider buying it right away. 10 stocks we like better than Lumentum › Lumentum Holdings (NASDAQ: LITE) stock took a beating so far in 2025. That's not surprising, considering the broader weakness in the stock market on account of macroeconomic headwinds caused by the tariff-fueled trade war. However, the 9% drop in Lumentum stock this year doesn't seem justified if we consider that artificial intelligence (AI) has been driving a solid turnaround in the company's business. Lumentum is known for selling optical and photonics components that enable high-speed data transmission in communications networks and data centers, and the demand for its products has taken off thanks to AI. This explains why the company's growth has been picking up in recent quarters. In the latest fiscal 2025 third-quarter earnings report (for the three months ended March 29), which was released on May 6, Lumentum easily beat expectations. Let's see what's driving Lumentum's growth, and why it may be a good idea to buy this tech stock hand over fist right now. Lumentum's fiscal Q3 revenue increased 16% year over year to $425 million, while its non-GAAP net income nearly doubled year over year to $0.57 per share. The company's cloud and networking business played a key role in driving this solid growth as it accounted for 86% of the company's top line. Lumentum's non-GAAP operating margin shot up to almost 11% from a slightly negative reading in the year-ago period, which explains the big jump in its bottom line. Lumentum credits the big jump in its margins and earnings to an improvement in manufacturing utilization rates and a favorable product mix. The company is expecting its gross margin to improve on a sequential basis in the current quarter as well, despite an estimated negative effect of 100 basis points on account of tariffs. Additionally, Lumentum says that "AI-driven cloud growth will continue to drive our financial momentum into Q4 and beyond" despite the macroeconomic headwinds caused by the tariff turmoil. That's not surprising, as demand for Lumentum's externally modulated lasers (EML), which are used in optical communications because of their ability to enable high-speed data transmission with high efficiency, increased because of AI. Lumentum's EML shipments hit a record last quarter, and the company believes that it can double revenue from this product this year compared to June 2024 levels. Moreover, the company is increasing its manufacturing capacity of EMLs to support the strong demand for these components. Such a move could pay off in the long run, since sales of optical components used in AI clusters are expected to double from $5 billion last year to $10 billion next year. As such, Lumentum is forecasting a significant acceleration in revenue. The company guided for revenue of $455 million in the current quarter at the midpoint of its guidance range, which would translate into a year-over-year increase of 48%. It's expecting non-GAAP earnings per share to land between $0.70 to $0.80 per share, which points toward a significant multiplication over the year-ago period's figure of $0.06 per share. Lumentum carries a 12-month median price target of $82, as per 18 analysts covering the stock. That points toward an 8% jump from current levels. However, a sharp spike in Lumentum's earnings growth could eventually translate into much stronger gains. Analysts project an 88% increase in Lumentum's earnings for fiscal 2025 to $1.90 per share. The forecast for the next fiscal year is even stronger, followed by another impressive jump in fiscal 2027. Assuming Lumentum manages to achieve $4.77 per share in earnings in fiscal 2027 and trades at 25 times earnings at that time (in line with the tech-laden Nasdaq-100 index's forward earnings multiple), its stock price could hit $120 in a couple of years. That points toward potential gains of 58% from current levels. Given that Lumentum is trading at just 19 times forward earnings, investors can buy this AI stock at an attractive valuation right now before it takes off in the long run. Before you buy stock in Lumentum, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Lumentum wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $613,951!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $796,353!* Now, it's worth noting Stock Advisor's total average return is 948% — a market-crushing outperformance compared to 170% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 12, 2025 Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy. This Incredibly Cheap Artificial Intelligence (AI) Stock Could Jump 8% as per Wall Street Analysts, But Don't Be Surprised to See It Soar Higher was originally published by The Motley Fool Sign in to access your portfolio
Yahoo
15-05-2025
- Business
- Yahoo
This Incredibly Cheap Artificial Intelligence (AI) Stock Could Jump 8% as per Wall Street Analysts, But Don't Be Surprised to See It Soar Higher
The rapidly growing demand for high-speed data transmission is turning out to be a tailwind for this optical components supplier. The company delivered impressive growth in its revenue and earnings last quarter, and the trend is expected to continue. The robust growth in this tech stock's earnings and its cheap valuation are reasons why investors should consider buying it right away. 10 stocks we like better than Lumentum › Lumentum Holdings (NASDAQ: LITE) stock took a beating so far in 2025. That's not surprising, considering the broader weakness in the stock market on account of macroeconomic headwinds caused by the tariff-fueled trade war. However, the 9% drop in Lumentum stock this year doesn't seem justified if we consider that artificial intelligence (AI) has been driving a solid turnaround in the company's business. Lumentum is known for selling optical and photonics components that enable high-speed data transmission in communications networks and data centers, and the demand for its products has taken off thanks to AI. This explains why the company's growth has been picking up in recent quarters. In the latest fiscal 2025 third-quarter earnings report (for the three months ended March 29), which was released on May 6, Lumentum easily beat expectations. Let's see what's driving Lumentum's growth, and why it may be a good idea to buy this tech stock hand over fist right now. Lumentum's fiscal Q3 revenue increased 16% year over year to $425 million, while its non-GAAP net income nearly doubled year over year to $0.57 per share. The company's cloud and networking business played a key role in driving this solid growth as it accounted for 86% of the company's top line. Lumentum's non-GAAP operating margin shot up to almost 11% from a slightly negative reading in the year-ago period, which explains the big jump in its bottom line. Lumentum credits the big jump in its margins and earnings to an improvement in manufacturing utilization rates and a favorable product mix. The company is expecting its gross margin to improve on a sequential basis in the current quarter as well, despite an estimated negative effect of 100 basis points on account of tariffs. Additionally, Lumentum says that "AI-driven cloud growth will continue to drive our financial momentum into Q4 and beyond" despite the macroeconomic headwinds caused by the tariff turmoil. That's not surprising, as demand for Lumentum's externally modulated lasers (EML), which are used in optical communications because of their ability to enable high-speed data transmission with high efficiency, increased because of AI. Lumentum's EML shipments hit a record last quarter, and the company believes that it can double revenue from this product this year compared to June 2024 levels. Moreover, the company is increasing its manufacturing capacity of EMLs to support the strong demand for these components. Such a move could pay off in the long run, since sales of optical components used in AI clusters are expected to double from $5 billion last year to $10 billion next year. As such, Lumentum is forecasting a significant acceleration in revenue. The company guided for revenue of $455 million in the current quarter at the midpoint of its guidance range, which would translate into a year-over-year increase of 48%. It's expecting non-GAAP earnings per share to land between $0.70 to $0.80 per share, which points toward a significant multiplication over the year-ago period's figure of $0.06 per share. Lumentum carries a 12-month median price target of $82, as per 18 analysts covering the stock. That points toward an 8% jump from current levels. However, a sharp spike in Lumentum's earnings growth could eventually translate into much stronger gains. Analysts project an 88% increase in Lumentum's earnings for fiscal 2025 to $1.90 per share. The forecast for the next fiscal year is even stronger, followed by another impressive jump in fiscal 2027. Assuming Lumentum manages to achieve $4.77 per share in earnings in fiscal 2027 and trades at 25 times earnings at that time (in line with the tech-laden Nasdaq-100 index's forward earnings multiple), its stock price could hit $120 in a couple of years. That points toward potential gains of 58% from current levels. Given that Lumentum is trading at just 19 times forward earnings, investors can buy this AI stock at an attractive valuation right now before it takes off in the long run. Before you buy stock in Lumentum, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Lumentum wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $613,951!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $796,353!* Now, it's worth noting Stock Advisor's total average return is 948% — a market-crushing outperformance compared to 170% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 12, 2025 Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy. This Incredibly Cheap Artificial Intelligence (AI) Stock Could Jump 8% as per Wall Street Analysts, But Don't Be Surprised to See It Soar Higher was originally published by The Motley Fool
Yahoo
16-02-2025
- Business
- Yahoo
This Magnificent Artificial Intelligence (AI) Stock Delivered Stellar Gains in 2024. It Can Jump Another 60%
Optical and photonics component seller Lumentum Holdings (NASDAQ: LITE) delivered an outstanding performance on the stock market last year, registering healthy gains of 61% as investors took note of the growing impact of artificial intelligence (AI) on the company's business, and it looks like the stock's red-hot run is here to stay in 2025. Lumentum released fiscal 2025 second-quarter results (for the three months ended Dec. 28, 2024) on Feb. 6. The company's growth trajectory continued improving during the quarter thanks to the robust performance of its cloud and networking business. It is worth noting that Lumentum finished fiscal 2024 on a sour note, as the weak demand for its optical components in the industrial segment and from telecom providers led to a sharp decline in its revenue and earnings. However, fiscal 2025 is turning out to be a much better year for the company as the demand for its optical components deployed in AI servers for high-speed data transmission is growing rapidly. Let's examine Lumentum's latest results and check why this company has room for more upside. Lumentum reported a 10% year-over-year increase in its fiscal Q2 revenue to $402 million, driven mainly by the AI-powered demand for its components in the cloud and networking business. More specifically, the cloud and networking segment's revenue increased 18% from the year-ago period, offsetting the 21% drop in the industrial business. The cloud and networking business now accounts for 84% of Lumentum's top line, and the growing influence of this segment on Lumentum's top line should pave the way for stronger growth going forward. This explains why the midpoint of Lumentum's fiscal Q3 guidance of $417.5 million would translate into a 14% jump from the year-ago period. Lumentum management points out that it is witnessing healthy demand from hyperscale cloud customers. More specifically, the demand from its largest hyperscale customer increased during the quarter, and it started volume shipments to a new customer. Even better, Lumentum's components are in the qualification phase at another customer. Management estimates that it will begin volume shipments to this new customer in fiscal Q4. The good part is that the demand for Lumentum's components used in data centers is so strong that the company is increasing its manufacturing capacity. So, it won't be surprising to see Lumentum's growth indeed picking up as the year progresses. Analysts are forecasting the company to end the year with an 18% increase in revenue to $1.6 billion, followed by healthy growth over the next couple of years as well. Lumentum management points out that its "engagement with cloud customers and AI infrastructure providers on their long-term technology and product roadmap has reached an all-time high." The shipments of its externally modulated lasers (EMLs), which enable high-speed data transmission with the help of fiber-optic cables, hit a record last quarter thanks to AI-related demand. Looking ahead, Lumentum's EML shipments are likely to head higher as it expects to gain more market share on account of new design wins for AI applications. What's more, the data center interconnect (DCI) market that Lumentum is targeting is expected to grow by 71% over the next four years, according to one estimate, with AI set to play a central role in this market's healthy growth. So, Lumentum could be at the beginning of a terrific long-term growth opportunity. Another thing worth noting is that Lumentum's margins are getting better on account of higher manufacturing utilization and its focus on keeping costs under check. As a result, Lumentum's non-GAAP (adjusted) operating margin jumped by six percentage points year over year in the previous quarter. This led to stronger growth of 75% in the company's bottom line last quarter to $0.42 per share. Consensus estimates are projecting a 73% increase in the company's bottom line this year to $1.75 per share, followed by outstanding growth over the next two years as well. Assuming Lumentum could hit $4.74 per share in earnings in fiscal 2027 and trades at 27.6 times earnings at that time (in line with the tech-laden Nasdaq-100 index's forward earnings multiple), its stock price could hit $131 in just over two years. That would be a 60% jump from current levels, suggesting that this AI stock has the potential to fly higher even after clocking impressive gains last year. Before you buy stock in Lumentum, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Lumentum wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,128!* Now, it's worth noting Stock Advisor's total average return is 948% — a market-crushing outperformance compared to 176% for the S&P 500. Don't miss out on the latest top 10 list. Learn more » *Stock Advisor returns as of February 7, 2025 Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Lumentum. The Motley Fool has a disclosure policy. This Magnificent Artificial Intelligence (AI) Stock Delivered Stellar Gains in 2024. It Can Jump Another 60% was originally published by The Motley Fool
