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Why Lumentum Holdings Stock Soared Today

By Evan Niu, CFA - May 4, 2017 at 1:07PM

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Speculation about a possible Apple win overshadowed softness from China.

What happened

Shares of Lumentum ( LITE -0.22% ) have soared today, up by 13% as of 12:15 p.m. EDT, after the company reported fiscal third-quarter earnings.

So what

Revenue in the quarter rose 11% to $255.8 million, and the company posted an adjusted profit of $0.49 per share. Sales fell slightly short of the consensus estimate of $259.3 million, while the bottom line was right on target. The company has been running into headwinds in China, but there may potentially be an extremely promising opportunity on the horizon: Apple ( AAPL -0.61% ).

Silver iPhone 7

Could Lumentum score a design win in the next iPhone? Image source: Apple.

Now what

In a statement, CEO Alan Lowe acknowledged that Lumentum "saw demand from China slow significantly," starting late in the quarter but persisting through April. Lowe expressed optimism about the longer-term outlook as demand continues to grow for bandwidth within data centers and telecommunications networks, which will require optical networking components.

There has been significant speculation that Apple is exploring 3D-sensing technology for the next iPhone and may tap Lumentum as a supplier. Inadvertently stoking that speculation, Lowe said that the company has "made substantial progress on 3D sensing for mobile devices applications" and is "looking to 3D sensing to enable new applications."

Outlook for the fiscal fourth quarter calls for revenue in the range of $220 million to $235 million, with non-GAAP earnings per share of $0.30 to $0.40.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Lumentum Holdings Inc. Stock Quote
Lumentum Holdings Inc.
$85.32 (-0.22%) $0.19
Apple Inc. Stock Quote
Apple Inc.
$163.76 (-0.61%) $-1.01

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