Courtesy of Benzinga.
Analysts at Loop Capital Markets initiated coverage of the optics sector on Tuesday. Now analysts at UBS have followed suit, although not with a similar industrywide bullish stance.
The Analyst
UBS’ Tejas Venkatesh initiated coverage of the following three stocks:
- Acacia Communications, Inc. (NASDAQ: ACIA): Buy rating, $50 price target.
- Oclaro Inc (NASDAQ: OCLR): Sell rating, $5.50 price target.
- Lumentum Holdings Inc (NASDAQ: LITE): Buy rating, $57 price target.
Acacia: Innovation Leader
- The Street is underestimating Acacia’s revenue potential for its new CFP2-DCO product, Venkatesh said.
- Revenue growth in 2018 will likely be 16 percent versus the consensus estimate of 11 percent, the analyst said.
- Acacia is one of UBS’ preferred plays on optical companies with the best non-China growth potential.
Oclaro: ‘Gap Year’
- Oclara will likely see gross margin and growth pressures in 2018 due to technology transitions in the intra-data center market, according to UBS.
- Oclara’s growth over the past two years was a result from being first to market with key 100g products and will likely slow, Venkatesh said.
- Acacia has better exposure to the growing inter-data center market than Oclaro, he said.
Lumentum: ‘Flag Bearer’ For 3-D Sensing
- Lumentum’s 25-percent decline in share prices over the past three months reflects risks to 2018, but undervalues the company’s opportunity in 2019, Venkatesh said.
- Lumentum’s competition lacks the necessary capacity to satisfy more than 30 percent of 3-D sensing demand in 2019, according to UBS.
- Aside from the iPhone, Android makers are moving to include 3-D sensing technologies which adds another potential catalyst to Lumentum’s story, he said.
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