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Analysts Forecast What's Next For Lumentum After The Oclaro Acquisition

Jayson Derrick

Lumentum Holdings Inc (NASDAQ: LITE) confirmed Monday that its acquisition of Oclaro is complete.

What Happened

Lumentum's finalized acquisition of Oclaro creates a new entity with greater scale in telecom and datacom markets, Barclays' Blayne Curtis said in a research report. The acquisition combines two optical companies into one, erasing the competitive threat the companies posed to each other.

The two companies will accelerate a combined roadmap with a more focused R&D spend and stronger financial profile, the analyst said. 

Why It's Important

Lumentum's acquisition of Oclaro is expected to shift its product mix, Raymond James' Simon Leopold said in a note.

As a standalone entity Lumentum's estimated calendar 2019 revenue breakdown is as follows, the analyst said:

  • Telecom: 42 percent.
  • 3-D: 35 percent.
  • Industrial lasers: 13 percent.
  • DataCom: 7 percent.
  • Other: 3 percent.

As a combined entity, the company's product mix is now likely to look like the following, Leopold said:

  • Telecom: 48 percent.
  • 3-D: 27 percent.
  • DataCom: 13 percent.
  • Industrial Lasers: 10 percent.
  • Other: 2 percent.

What's Next

Lumentum's acquisition could generate short-term synergies from SG&A savings as early as calendar 2019, Leopold said. The deal will likely prove to be complementary, with modest overlap, he said. 

Raymond James lifted its fiscal 2020 revenue estimates from $1.664 billion to $2.235 billion, while its EPS estimates moved higher from $5.64 to $5.81.

Related Links:

Should Investors Buy Lumentum After Monday's Plunge? The Street Debates

JPMorgan Finds Multiple Reasons To Turn Bullish On Lumentum

Latest Ratings for LITE

Date Firm Action From To
Dec 2018 Raymond James Maintains Strong Buy Strong Buy
Nov 2018 UBS Maintains Buy Buy
Nov 2018 Morgan Stanley Maintains Equal-Weight Equal-Weight

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