Goldman Sachs Cuts Lumentum (LITE) to Sell
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(Updated - October 11, 2016 9:12 AM EDT)
Goldman Sachs downgraded Lumentum (NASDAQ: LITE) from Neutral to Sell with a price target of $36. Analyst Doug Clark said its premium valuation already reflects industry tailwinds and product mix.
"Lumentum is slightly behind competitors in terms of timing of new product ramps, and ramping product CFP2-ACO may be a bit of a substitute within its Telecom segment (60% of total sales). We expect its Telecom growth to decelerate to 7% yoy growth in CY17E vs. 14% in CY16E. Additionally, Lumentum faces challenging comps in its ROADM business and should face more competition in the Verizon metro build, where it may soon lose its status as the sole sourced supplier," said Clark.
The analyst continued, "We expect Lumentum’s future margin (in its Op Comms segment) to remain limited compared to Finisar based on historical precedent and annual Telecom price declines."
Clark added, "Ex-Acacia, Lumentum screens as the most expensive component stock among direct peers on a P/E basis, at 24X CY17E vs. peers at 20X on average, despite having similar EPS growth forecasts and margin profile."
Shares of Lumentum closed at $44.50 yesterday.
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