Barron’s: Lumentum’s prospects bright though Apple’s be murky

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It’s hard, if you write a tip-sheet, not to confuse the company for the stock price.

 

From Ben Levisohn’s An Apple Supplier That Can Thrive Even If iPhone Sales Don’t, posted Friday.

Many investors first heard of Lumentum Holdings in early November after the Milpitas, Calif.-based supplier of optical components sliced its quarterly sales forecast because a “lead customer” had reduced an order. The markets quickly connected the dots to Apple. Lumentum is a key supplier for 3-D sensing products that enable higher-end iPhones’ FaceID sensors.

Apple’s shares fell 5% on Nov. 12, when Lumentum (LITE) cut its guidance, and have dropped an additional 9% since on weak iPhones sales. Barron’s recommended buying Lumentum shares a week after the initial disclosure, and they’ve risen 26%. While the iPhone-maker’s prospects remain murky, Lumentum’s future is bright, and its stock is still attractive…

The analyst consensus estimate is for Lumentum’s sales to increase 46% to $1.9 billion this year, followed by $2.2 billion in 2020. Earnings per share are forecast to rise 6.4% to $4.46, then $5.30 in 2020. The market’s refocused appreciation for the long game its is playing in 3D sensing—selling to more than just one, albeit large, customer—and Lumentum’s other promising growth prospects will keep shares rising.

My take: Thanks for the tip. But Apple’s prospects are “murky”? The stock price may be languishing, but Apple the company will thrive long after Lumentum has been swallowed up.

See also: Four lessons I learned from Apple’s guidance warning.