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Shares of fiber-optic component suppliers are rallying today after D.A. Davidson’s Mark Kelleher late yesterday initiated coverage of three of the names with a Buy rating, writing that investors should look past the bumps in the road at the moment as far as demand. Shares of Lumentum Holdings (LITE), Acacia Communications (ACIA), and Oclaro (OCLR), all of which were initiated with a Buy by Kelleher, are up 3.6%, 6%, and 7%, respectively. Kelleher’s overarching message is that, "despite a short-term headwind from China, the optical networking market is poised for significant growth over the next several years." Going through one by one, although Lumentum is “strong” in transceivers for 100-gigabit-per-second communications links, he notes the company is also "somewhat unique in our coverage group in that it applies its laser expertise beyond the telecom and Datacom transceiver market to address the commercial market." For example, Keller is excited about the company’s parts being used in so-called 3-D sensing, a feature that is expected to come to Apple’s (AAPL) next iPhone, and many other smartphones, in short order: One such application is to the “3D sensing” market.
Lumentum Holding, Oclaro and Acacia Communications all won buy ratings Friday from D.A. Davidson.
Consider TE Connectivity Ltd. (TEL), a firm in the Electronics - Miscellaneous Components, which could be a great candidate for another earnings beat.