Market Overview

Craig-Hallum: Lumentum's Oclaro Purchase Could Trigger Further M&A In Optical Sector

Share:
Craig-Hallum: Lumentum's Oclaro Purchase Could Trigger Further M&A In Optical Sector
Related
36 Biggest Movers From Friday
30 Stocks Moving In Friday's Mid-Day Session
Lumentum up, Infinera down as Goldman analyst covers opticals (Seeking Alpha)
Related OCLR
Commerce Secretary Wilbur Ross Confirms ZTE Deal
ZTE Reportedly Reaches Deal With US; Optical Stocks Mixed

Lumentum Holdings Inc (NASDAQ: LITE) reached an agreement to acquire Oclaro Inc (NASDAQ: OCLR) in a deal that makes "strong strategic sense" for the companies and highlights the longer-term potential of the optical sector, according to Craig-Hallum Capital Group. 

The Analyst

Analyst Richard Shannon maintains a Buy rating on Lumentum Holdings' stock with an unchanged $90 price target.

The Thesis

Oclaro's combination with Lumentum makes sense on a strategic and financial level, Shannon said in a Tuesday report.

On the strategic front, Oclaro provides a strong leading edge product in the telecom industry with coherent transmission products, an area where Lumentum has lagged in recent quarters, the analyst said. On the financial front, the combination should be accretive to Lumentum's business by around 10 percent based on expectations of $60 million in annual synergies, he said.

Lumentum's acquisition is also a "potential starting point" for increased consolidation activity within the optical space, Shannon said. The industry has become too fragmented, and Lumentum's M&A deal will likely "spark other moves," he said — meaning optical stocks are likely to become "healthier," with more favorable longer-term pricing.

Lumentum is one of Craig-Hallum's top ideas for 2018, the analyst said. 

Price Action

Lumentum shares were trading down slightly at $71.95 late Tuesday afternoon. 

Related Links:

Morgan Stanley's Guide On How To Play The Optical Space

UBS Highlights Two Buys, One Sell In The Optics Sector

Latest Ratings for LITE

DateFirmActionFromTo
Jun 2018Goldman SachsAssumesNeutralBuy
May 2018JP MorganMaintainsNeutralNeutral
May 2018BarclaysMaintainsOverweightOverweight

View More Analyst Ratings for LITE
View the Latest Analyst Ratings

Posted-In: Craig Hallum opticalAnalyst Color News Price Target Reiteration M&A Analyst Ratings Best of Benzinga

 

Related Articles (OCLR + LITE)

View Comments and Join the Discussion!