New Morningstar Analyst Report for Lumentum Holdings

Lumentum Holdings is a spin-off of JDS Uniphase with its predecessor’s optical component and commercial laser operations. Despite Lumentum’s domain expertise in optical communications components that face robust demand, the firm has not demonstrated its ability to sustain pricing power because of a sporadic purchasing pattern and fragmented market structure. 3-D sensing in consumer electronics could provide a windfall in revenue, but the laser diode business is quickly becoming crowded in anticipation of overcoming demand and we don’t think Lumentum can carve out an economic moat in this business.