Damnang
· Damnang’s Substack
· June 29, 2026 at 01:24
· ⏱ 10 min read
| Read on Substack ↗
Summary
Lumentum's 10x run and subsequent 25% drawdown create a valuation puzzle: the 32x sales multiple already prices in its 200G EML monopoly, but the author argues that additional growth engines—a potential 300G per-lane step, OCS, and CPO—are not yet reflected in the stock. If these materialize, the pullback may be an opportunity; if not, the multiple is expensive. The article provides a framework for weighing which scenarios are already discounted.
•Lumentum stock went from $88 to $1,085 in a year and now sits 25% below its high, creating opposing narratives of a 10x gain vs. a 25% loss.
•Latest quarterly revenue was $808M (record, +90% YoY), with non-GAAP EPS of $2.37 beating consensus; next quarter guided to $960M–$1.01B and EPS of $2.85–$3.05.
•The stock trades at ~32x trailing price-to-sales, which the author says already prices in near-perfect execution and much of the next-generation pricing premium.
•Lumentum effectively monopolizes 200G EML (the core light source in 1.6T optical modules), with demand exceeding supply by more than 30% and the gap widening.
•CEO described OCS (optical circuit switch) and CPO (co-packaged optics) as growth drivers still in their 'early innings,' alongside a fourth 'scale-across' component category that is underappreciated.
•Industry chatter suggests Google has asked for a 300G per-lane speed (a 1.5x step never seen before) as an intermediate between 200G and 400G, which would benefit Lumentum if real.
The article builds a case that Lumentum's current valuation only reflects the 200G EML monopoly, while additional engines (300G step, OCS, CPO) are not priced in. Strong fundamental momentum (record r
The article builds a case that Lumentum's current valuation only reflects the 200G EML monopoly, while additional engines (300G step, OCS, CPO) are not priced in. Strong fundamental momentum (record revenue, margin expansion, guidance) and the CEO's own characterization of 'early innings' for OCS/CPO suggest upside if those catalysts materialize. However, the 32x sales multiple leaves no room for error, making it a high-conviction watch but not an outright buy call.
Risk: The 32x P/S multiple already prices in perfection; any disappointment on the 300G transition, OCS/CPO timelines, or macro-driven sector rotation could lead to further drawdown. Customers like Google and Nvidia could also shift supply chains.