Lumentum Holdings (LITE) shares jumped about 10% to $819.98 on Monday, Oct. 26, after StoneX initiated coverage of the optical networking company with a Buy rating and a $1,200 price target.
The rally spread to other optical networking stocks. Coherent (COHR) and Applied Optoelectronics (AAOI) gained about 7.6% and 10%, respectively, while the Roundhill Photonics & Optics ETF (LYTE) rose 5%.
StoneX said Lumentum occupies “critical scarcity points” in high-speed indium phosphide lasers, cloud transceivers and optical circuit switches, The Fly reported.
The analyst also highlighted management’s comments that AI-related optoelectronic components were “completely sold out” through 2029, as Lumentum CEO Michael Hurlston told Bloomberg earlier this month.
The new price target implies roughly 46% upside from Lumentum’s afternoon trading price.
Why Wall Street is bullish on Lumentum
Lumentum, based in San Jose, California, makes lasers and optical components used in telecommunications networks and data centers.
The company has benefited largely from the AI infrastructure boom as tech hyperscalers spend billions of dollars building data centers that require faster connections between servers.
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One of its biggest backers is Nvidia (NVDA).
In March, Nvidia announced a multiyear strategic partnership with Lumentum to develop advanced optical technologies for next-generation AI infrastructure.
The agreement includes a multibillion-dollar purchase commitment from Nvidia and rights to access future manufacturing capacity for advanced laser components.
Nvidia also committed to invest $2 billion in Lumentum to support research and development and expand U.S. manufacturing, including a new fabrication facility.
“Together with Lumentum, NVIDIA is advancing the world’s most sophisticated silicon photonics to build the next generation of gigawatt-scale AI factories,” Nvidia CEO Jensen Huang said in the announcement.
StoneX isn’t the only firm optimistic about Lumentum.
On Oct. 20, Jefferies analyst Blayne Curtis raised his price target on Lumentum to $1,250 from $1,200 and maintained a Buy rating.
Curtis expects Lumentum to capture a larger share of Alphabet’s (GOOGL) optical circuit switching demand and benefit from growing adoption of 1.6T transceivers.
Jefferies also expects Lumentum to become Alphabet’s largest optical circuit switch supplier next year, overtaking the tech giant’s in-house production.
Lumentum shares have gained 126% so far in 2026.
Lumentum earnings reflect growing AI demand
Lumentum’s latest quarterly results showed strong demand for its optical networking products.
In its fiscal fourth quarter ended June 27, the company reported revenue of $1.01 billion, up 109.3% from $480.7 million a year earlier. Adjusted earnings rose to $3.23 per share from $0.88 a year earlier.
For fiscal 2026, revenue reached $3.01 billion, compared with $1.6 billion in fiscal 2025.
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The company expects fiscal first-quarter 2027 revenue of $1.225 billion to $1.275 billion, with adjusted earnings of $4.05 to $4.35 per share.
Lumentum is scheduled to report its next quarterly results on Nov. 5.
Investors will be watching closely whether the company can expand production quickly enough to meet demand, as well as its outlook for cloud networking revenue and profit margins.
Lumentum shares have gained 126% so far in 2026, as of this writing, although the stock has pulled back sharply from its recent all-time high of $1,143, reached on October 8.
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