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Lumentum Stock Breaks Out On Apple iPhone 3D Sensor Speculation

Lumentum hinted that it will be a supplier for the upcoming iPhone 8. (Lumentum)

Lumentum Holdings (LITE) stock popped to a buy point Wednesday after the company's CEO discussed an emerging 3D sensor market opportunity on his fiscal Q2 earnings conference call with analysts late Tuesday, leading Wall Street to speculate over an Apple (AAPL) iPhone 8 design win.

Lumentum, whose core business is optical communications, late Tuesday reported mixed fiscal Q2 results and guidance.

Lumentum stock soared 14% in the stock market today to 45.85, touching a record high and hitting a 45.35 buy point out of a four-month consolidation.

Apple's iPhone 8 smartphone will include a 3D-sensing module to enable augmented-reality applications, Rosenblatt Securities recently said. Rosenblatt Securities named Austria's AMS AG as a likely supplier of 3D sensors to Apple.


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Following Lumentum's earnings call, analysts said Apple could have more than one 3D sensor supplier qualified to ship parts.

A "3D sensing iPhone win" could "start to materialize mid-2017," Piper Jaffray analyst Troy Jensen wrote in a research report.

"We were extremely encouraged the company has recorded their first 3D sensing consumer revenues, which we believe could be for one of the new iPhones to be released in 2017," added Jensen. "We believe this initial order is for final qualification, and while we don't expect this opportunity to translate into material revenues in fiscal Q3, we are becoming incrementally more optimistic material revenue contribution can begin in the second half of 2017.

"We believe the 3D consumer sensing opportunity is a long term material revenue catalyst that is also not baked into Street estimates."

Lumentum's forerunner, JDS Uniphase, developed 3D sensor technology for Microsoft's (MSFT) Kinect motion-gaming system, released in 2010. JDS Uniphase spun off Lumentum in 2015.

Finisar Also Moving Into 3D Sensors

Another fiber-optics parts maker, Finisar (FNSR), also recently said it's pushing into the 3D sensor market.

"We expect 3D sensing to be a significant growth opportunity over the coming years," Lumentum CEO Alan Lowe said on the earnings call. "Putting aside the time-frame for when this happens, I would say that the market is multiple times bigger than the connect business and (I) could imagine quarters of 100 plus million dollars type of marketplace growing to over $1.

"So I'd say that every indication is that it's a huge growth driver for us. Timing for initial ramp, I think we're still going to remain quiet on that until it actually starts happening."

James Kisner, a Jefferies analyst, said in a report that "Lumentum is working with several handset OEMs for 3D sensing applications and has begun shipping units for revenue. CEO Alan Lowe stated he could imagine 'quarters of a $100 plus million type of marketplace growing to over $1 billion' (we suspect annually)."

At Needham & Co., analyst Alex Henderson said: "We think 3D sensing should take center stage as we move into the second half of 2017. Management made some strong comments on timing, scope of opportunity and completion of qualification with multiple vendors."

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