A Look At Lumentum Holdings (LITE) Valuation After New US$400 Million Credit Facility

Lumentum Holdings (LITE) has arranged a new senior secured revolving credit facility of up to US$400 million with Wells Fargo and other lenders, providing the company with additional liquidity for working capital and general corporate purposes.

See our latest analysis for Lumentum Holdings.

The new US$400 million facility comes as Lumentum’s share price sits at US$386.11, with a 30-day share price return of 16.51% and a 90-day share price return of 145.70%. The 1-year total shareholder return of 326.92%, along with very large 3-year and 5-year total shareholder returns, suggests strong longer term momentum has already been in place.

If this kind of move has your attention, it could be a good moment to see what else is out there in tech and AI, starting with high growth tech and AI stocks.

With the stock at US$386.11 after a sharp multi period run and trading above the current analyst price target, the key question now is simple: is there still value here, or is the market already pricing in future growth?

Most Popular Narrative: 51.3% Overvalued

Compared with the last close at US$386.11, the most popular narrative points to a fair value closer to US$255, framing the current price as rich against its own assumptions.

Analysts are assuming Lumentum Holdings's revenue will grow by 23.4% annually over the next 3 years. Analysts assume that profit margins will increase from 1.6% today to 12.6% in 3 years time.

Read the complete narrative.

Curious what kind of revenue curve and margin reset would need to materialise to justify this richer valuation? The narrative leans on fast compounding growth, rising profitability, and a premium future earnings multiple usually reserved for market favourites. Want to see exactly how those assumptions stack up over the next few years?

Result: Fair Value of $255.14 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this depends on concentrated demand from a few major cloud customers and on Lumentum successfully delivering its planned capacity ramp without production setbacks or delays.

Find out about the key risks to this Lumentum Holdings narrative.

Build Your Own Lumentum Holdings Narrative

If you see the numbers differently or prefer to rely on your own work, you can build and stress test a custom view in minutes: Do it your way.

A great starting point for your Lumentum Holdings research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Lumentum has you thinking more broadly about opportunities, use this momentum to widen your watchlist and compare fresh ideas side by side.

• Spot potential bargain opportunities by scanning these 875 undervalued stocks based on cash flows that might be pricing in more pessimism than their underlying cash flows suggest.
• Explore the growth trend by focusing on these 25 AI penny stocks that are building businesses around artificial intelligence rather than just the theme.
• Add income angles to your research by checking out these 14 dividend stocks with yields > 3% that could complement growth names with regular cash returns.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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