2 Optical Stocks To Buy After Tuesday's Selloff
Image source: Getty Images.
1. Lumentum: the steeper ramp
Lumentum makes the lasers and optical components that move data inside AI data centers, and demand has been running ahead of what it can supply.
Revenue for the fiscal fourth quarter (the period ended June 27) came in at $1.01 billion, up 109% year over year from $480.7 million. Full fiscal-year revenue rose 83% to $3.01 billion. And management expects $1.225 billion to $1.275 billion of revenue this quarter, another jump of about 24% at the midpoint.
CEO Michael Hurlston said in the earnings release that the company is “positioned at the heart of a secular industry shift.” The guidance backs him up.
Profitability is scaling even faster than sales. Non-GAAP (adjusted) gross margin reached 50.4% in the fourth quarter, up from 46% for the full year, and adjusted earnings per came in at $3.23. Guidance calls for $4.05 to $4.35 this quarter alone.
Also worth noting: the company reported a $7.2 billion GAAP net loss for the quarter, driven by a one-time, non-cash $7.8 billion charge tied to converting convertible notes into stock. That’s an accounting event, not a business problem, but it explains why the stock has no ordinary price-to-earnings ratio right now.
The problem, however, is the price. Even after the sell-off, Lumentum’s $78 billion market value works out to about 26 times the revenue it just reported for fiscal 2026.
Against earnings, the picture is friendlier. s trade at about 40 times what the company is expected to earn over the fiscal year ahead — a year management has already opened by guiding to about $1.25 billion of first-quarter revenue, a pace that annualizes to well above all of fiscal 2026’s sales. Sure, a miss could hit the stock hard here. But the company is guiding higher while telling investors demand still exceeds what it can build.
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NASDAQ: LITE
Lumentum
Today’s Change
(-5.23%) $-45.71
Current Price
$827.60
Key Data Points
Market Cap
$64BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.
Day’s Range
$821.03 – $893.85
52wk Range
$115.20 – $1085.68
Volume
31.3K
Avg Vol
5.3M
Gross Margin
39.74%
2. Coherent: more business at a lower premium
Coherent is the broader company, supplying optical transceivers, lasers, and the materials behind them across data center, communications, and industrial markets.
Its growth is slower than Lumentum’s but still impressive. Fiscal fourth-quarter revenue rose 34% year over year to a record $2.05 billion, up 13% sequentially, and full-year revenue climbed 23% to $7.12 billion. Notably, the data center and communications segment rose 59% year over year to $1.6 billion — 79% of the quarter’s sales.
The margin recovery is what makes Coherent interesting. Operating margin hit 12.4% in the quarter, up from 0.4% a year earlier, and earnings per swung to a positive $1.19 on a GAAP basis from a year-ago loss. For the current quarter, management guided to $2.2 billion to $2.4 billion of revenue, with adjusted earnings per of $1.85 to $2.05, up from the $1.74 just posted.
“Fiscal 2026 was an outstanding year for Coherent, with record revenue, significant margin expansion, and non-GAAP EPS growth that was more than twice the rate of revenue growth,” CEO Jim Anderson said in the release.
The soft spot is Coherent’s industrial segment, which shrank 16% year over year to $430.5 million. The non-AI side of the business is working against the AI side, and that drag is part of why Coherent costs less. s trade at about 33 times expected earnings for the fiscal year ahead and about 8 times fiscal 2026 revenue, against roughly 40 times and 26 times for Lumentum.
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NYSE: COHR
Coherent
Today’s Change
(-6.19%) $-18.96
Current Price
$287.47
Key Data Points
Market Cap
$56BMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.
Day’s Range
$284.75 – $312.00
52wk Range
$85.52 – $440.00
Volume
76.5K
Avg Vol
6.1M
Gross Margin
38.38%
Speed against breadth
Both sell components the AI build-out is short of. Both just guided to more growth this quarter. And both got marked down hard Tuesday on a worry their own results argue against.
Lumentum is the concentrated, faster ramp at a price that assumes the ramp continues. Coherent gives up speed for breadth, a recovering margin base, and a considerably lower earnings multiple, with the shrinking industrial segment as the trade-off.
I think both look attractive at these marked-down prices. The market sold them on the risk that AI demand fades. Both spent this month reporting demand they cannot fully supply.
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About the Author
Daniel Sparks is a contributing Motley Fool stock market analyst covering technology, industrials, financials, and consumer goods. Daniel is the owner and chief investment officer of Sparks Capital Management. He holds a master’s degree in business administration from Colorado State University. The Globe and Mail profiled him and his investing philosophy in an article titled, “This stock picker is outperforming nearly everybody else. Here’s how he is doing it.”
Stocks Mentioned
Lumentum
NASDAQ: LITE
$827.60
(-5.23%)-$45.71
Motley Fool Stock Advisor’s Latest Pick
—% Avg Return
Coherent
NYSE: COHR
$287.47
(-6.19%)-$18.96
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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