It’s time to step to the sidelines on Lumentum after its latest earnings results , according to Barclays. Analyst Tom O’Malley downgraded shares of the light waves and laser product maker to equal weight from overweight, saying the company has had “one too many resets” after posting a weaker-than-expected outlook. “Another reset, but this time across all segments,” O’Malley wrote on Wednesday. “We move to Equal Weight as we struggle to find a compelling reason to support the stock with no imminent positive catalyst and further risk to Telecom.” LITE YTD mountain Lumentum shares YTD Not only did Lumentum report third-quarter earnings and revenue on Tuesday that missed analysts’ estimates, the firm’s fourth-quarter guidance fell far below expectations. Lumentum reported adjusted earnings of 75 cents per share, lower than calls for 77 cents per share, according to FactSet. It posted revenue of $383.4 million, compared to expectations of $390.9 million. Meanwhile, Lumentum gave fourth-quarter adjusted earnings guidance between 45 cents and 65 cents, missing analysts’ expectations for 77 cents. The company expects revenue to fall between $350 million and $380 million, below analysts’ forecasts for $390.2 million. Lumentum is already down 11% this year, after falling 50% in 2022. However, the analyst dropped his price target to $40 from $55, a more than 25% cut. The new target suggests shares have roughly 15% downside from Tuesday’s close. The stock fell nearly 4% after earnings Tuesday. However, with inventory challenges “persisting” within its telecom business, and a “weak” outlook for its commercial lasers business, as well as rising competition, Lumentum will continue to face challenges to its stock price, according to the analyst. “We see this as a combination of inventory digestion, Sony taking all IP15 Pro world facing sockets, and some additional share loss to COHR (we model 30% share for front facing),” the analyst wrote. “Even when assuming some better gross margins into CY24, we struggle to get to greater than $3.50 of EPS in CY24 and move to Equal Weight.” —CNBC’s Michael Bloom contributed to this report.
