We recently reviewed a bullish investment thesis on Lumentum Holdings Inc. (LITE) published by R. Dennis on OppCost’s Substack. Below is a summary of the core arguments supporting the positive outlook. As of January 29, Lumentum shares were trading at $381.44, with trailing and forward P/E ratios of 234.01 and 64.94, respectively, according to Yahoo Finance.

Lumentum designs and sells optical and photonic technologies across the Americas, Asia-Pacific, Europe, the Middle East, and Africa. The company has emerged as a key beneficiary of the global AI infrastructure buildout, successfully reinventing itself from a consumer-electronics component supplier into a vertically integrated leader in cloud networking and data center connectivity.

Over the past five years, Lumentum worked through a sharp inventory correction that drove revenue down more than 23% in fiscal 2024. Since then, the company has staged a V-shaped recovery, fueled by rapidly rising demand for high-speed optical transceivers — particularly 800G and 1.6T modules used by hyperscale cloud operators.

Strategic acquisitions such as NeoPhotonics and Cloud Light have enabled Lumentum to move higher up the value chain, allowing it to sell complete transceiver modules directly to major hyperscalers. This shift has expanded margins, strengthened its competitive position, and deepened customer relationships. Today, the Cloud & Networking segment accounts for approximately 88% of total revenue, supported by the company’s Indium Phosphide–based EML technology, a key differentiator in performance-critical applications. While the legacy Industrial Tech segment continues to face challenges, it remains cash-generative.

Operational momentum has accelerated meaningfully. In the first quarter of fiscal 2026, revenue climbed 58% year over year to $533.8 million, while non-GAAP operating margins expanded to 18.7%, highlighting improving efficiency and operating leverage.

Although the stock currently trades at a premium that reflects high expectations for execution, valuation models point to intrinsic value near $126 per share — underscoring both elevated current pricing and the powerful long-term growth narrative tied to AI infrastructure. With its strong market positioning, advanced technology portfolio, and rising AI-driven demand, Lumentum offers an attractive way for investors to gain exposure to the AI supply chain. For those comfortable with near-term volatility and convertible debt considerations, the company represents a high-growth, strategically aligned opportunity with substantial long-term potential.

Previously, we highlighted a bullish thesis on Wolfspeed (WOLF) in October 2024, centered on its leadership in silicon carbide and gallium nitride technologies and the ramp-up of its Mohawk Valley fab to capture electric vehicle and renewable energy demand. Since that coverage, Wolfspeed shares have gained approximately 6.9%. OppCost’s outlook on Lumentum follows a similar framework, emphasizing AI infrastructure and well-executed acquisitions as the primary catalysts for future growth.