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Lumentum (LITE) Soars 3.7%: Is Further Upside Left in the Stock?

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Lumentum (LITE - Free Report) shares rallied 3.7% in the last trading session to close at $100.60. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 6.4% gain over the past four weeks.

The increase in share price can be attributed to the continued strength in demand for Lumentum Holdings’ key product lines, especially in the Industrial & Consumer and Lasers segment. Rising demand for the company’s products, which support next-generation customer solutions augurs well.

The buzz surrounding the acquisition of NeoPhotonics is likely to be another catalyst. In November 2021, the company announced its intent to acquire NeoPhotonics.

With this acquisition, the company is eyeing the fast-growing optical communications market. NeoPhotonics will help Lumentum Holdings to improve optical networking speed and scalability. Subject to regulatory and customary conditions, the transaction is expected to conclude in the second half of the calendar year 2022. 

This optical networking products maker is expected to post quarterly earnings of $1.59 per share in its upcoming report, which represents a year-over-year change of -20.1%. Revenues are expected to be $446.24 million, down 6.8% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Lumentum, the consensus EPS estimate for the quarter has remained unchanged over the last 30 days. And a stock's price usually doesn't keep moving higher in the absence of any trend in earnings estimate revisions. So, make sure to keep an eye on LITE going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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