Lumentum Holdings, a maker of fiber-optic components, pre-announced weak March-quarter results tied to an order cancellation that analysts believe involved Ciena. LITE stock plunged while CIEN stock fell on the news. Meanwhile, shares dove for Coherent, another fiber-optic parts maker.
For the March quarter, Lumentum lowered its revenue outlook for LITE stock by $63 million. Lumentum also indicated that they'll have another weak quarter in their June quarter.
"Late in our fiscal 2023 third quarter, a network equipment manufacturer who represented more than 10 percent of our fiscal Q2 revenue informed us that due to their inventory management, they would not take the shipments we had originally projected for the quarter," said the Lumentum release.
Meanwhile, Ciena reaffirmed its prior guidance for its second fiscal quarter of 2023, full-year 2023 as well as its prior statements on backlog and inventory draw-downs.
LITE Stock: Industry Consolidator
On the stock market today, Lumentum retreated 9.7% to close at 46.33. CIEN stock dropped 2.7% to 50.48. COHR stock dove 10.1% to 32.98.
"While we are mildly surprised that Lumentum only learned of the digestion late in the quarter, we expect that we will see other surprises like this one as this process unfolds across the industry," UBS analyst David Vogt said in a note to clients. "As for Lumentum, we believe the market to some degree was expecting a cut to the outlook given the depressed multiple."
Hanover, Md.-based Ciena's gear is built into telecom networks and internet data centers.
At Jefferies, analyst George Notter said in his note to clients: "As we look at the situation, Ciena could be reducing inventory for a number of reasons. LITE's component lead times are coming down. Or, they simply over-bought from Lumentum relative to their business outlook."
In addition, he said Ciena could be experiencing "additional supply chain problems with other 'golden screw' components."
CIEN Stock: Relative Strength Rating
Lumentum has been a consolidator in the fiber-optic components industry. It acquired NeoPhotonics and Oclaro.
As of the market open on Thursday, LITE stock owns a Relative Strength Rating of 16. The Relative Strength Rating of CIEN stock stands at 79, according to IBD Stock Check-up.
Also, Lumentum sells Apple 3D sensors built into iPhones.
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