Appreciate your LITE post. Don’t you agree that even with significant revenue and FCF growth rates for next 5 years, LITE is significantly overvalued based on the projected FCF and terminal value?
Hey, thanks for the comment. I'll get to the modeling in either part 3 or part 4 which should come out sometime during Q1. While I do agree with you that valuation is stretched, I think modeling them out like a traditional growth company is conservative and doesn't take into account just how explosive and perfectly positioned optical interconnects are in this moment. Just as an example, the market for scale up networking (GPU to GPU within a rack) is traditionally done with copper but must move to optics and CPO in particular as bandwidths increase--and scale up is a much bigger market than scale out. This can cause some major price hikes for Lumentum's ultra high power lasers which they basically have a monopoly in. And we really have no clue how explosive those price hikes are, could be in a shortage situation like DRAM was this year. So I totally think theres still upside from here. Sorry for the long reply, that was sort of a preview for my next post lmao!
Thanks! COHR is super interesting as the only non-Chinese scaled alternative to LITE and AAOI in pluggables which I'll mention in the intro to my next post. I'll also get into them more deeply on the laser and OCS sections coming up next since they also compete there.
Thx. I was thinking cohr could have more capacity growth in % in 26 vs lite assuming it's 6 inch fabs ramp up well. 25 had been a year of long lite short cohr for factor netural...Wonder will it reverse but I do agree that lite seems better in ocs with their mems technology
Yeah thats a really good point, and there is just so much overflow demand from LITE as Google currently eating all their supply and they're even shedding customers. Maybe COHR won't have to worry about filling up their fabs for a while. Honestly need to do more research into that
Appreciate your LITE post. Don’t you agree that even with significant revenue and FCF growth rates for next 5 years, LITE is significantly overvalued based on the projected FCF and terminal value?
Hey, thanks for the comment. I'll get to the modeling in either part 3 or part 4 which should come out sometime during Q1. While I do agree with you that valuation is stretched, I think modeling them out like a traditional growth company is conservative and doesn't take into account just how explosive and perfectly positioned optical interconnects are in this moment. Just as an example, the market for scale up networking (GPU to GPU within a rack) is traditionally done with copper but must move to optics and CPO in particular as bandwidths increase--and scale up is a much bigger market than scale out. This can cause some major price hikes for Lumentum's ultra high power lasers which they basically have a monopoly in. And we really have no clue how explosive those price hikes are, could be in a shortage situation like DRAM was this year. So I totally think theres still upside from here. Sorry for the long reply, that was sort of a preview for my next post lmao!
If you like LITE, do you also like Viavi Solutions (VIAV)?
This is really fascinating. Love your analogy for the non-technical readers. Keep up the great work
Thanks Andy! appreciate the support
Great post. Would love to see some comparison vs competitors esp cohr
Thanks! COHR is super interesting as the only non-Chinese scaled alternative to LITE and AAOI in pluggables which I'll mention in the intro to my next post. I'll also get into them more deeply on the laser and OCS sections coming up next since they also compete there.
Thx. I was thinking cohr could have more capacity growth in % in 26 vs lite assuming it's 6 inch fabs ramp up well. 25 had been a year of long lite short cohr for factor netural...Wonder will it reverse but I do agree that lite seems better in ocs with their mems technology
Yeah thats a really good point, and there is just so much overflow demand from LITE as Google currently eating all their supply and they're even shedding customers. Maybe COHR won't have to worry about filling up their fabs for a while. Honestly need to do more research into that
Good stuff here, looking forward to the next post with the financials
Nice post! OCS revenue from LITE is interesting as well.
Thanks! Yup I totally agree. Will cover this one on the next post
Thank you! Appreciate your support