The thesis

Lumentum Holdings Inc. is a leader in optical and photonic product manufacturing. The company's revenue growth is 90.1% year-over-year, with a gross margin of 37.71% and a net margin of 17.68%. The conviction score is 51 out of 100, indicating a medium level of confidence. The analyst consensus rating is buy, despite a DCF intrinsic value of -$16.

Why now

The current market force of AI buildout is driving growth, with China's chip tool push and AI adoption in Asia creating new opportunities. The recent news of Malaysia becoming a growth standout in Asia due to AI and chip investments highlights the potential for Lumentum's products.

What to watch

The company's revenue growth and margin performance over the next few quarters will be crucial in confirming the thesis. Investors should also monitor the progress of China's chip tool push and the adoption of AI in Asia, as well as any updates on Lumentum's customer concentration and supply chain management.

Key risks

The company's orders are concentrated among a small number of large data-centre customers, making it vulnerable to spending pauses. The high P/E ratio of 126.8x and negative DCF intrinsic value also pose valuation risks. Additionally, the US-China squeeze on chip tools may impact Lumentum's business.

Theme exposure