From CSFB
1On 01/30/
Luminent is leading supplier of single mode active and passive optical components designed specifically for the metropolitan and access segments of network architectures. The company current employs 1,000 and has manufacturing operations in the United States, China and Taiwan.
Investment Summary
Luminent delivered strong Q4:00 results significantly outpacing our top and bottom-line estimates of $38 million and $0.01 per share respectively. Sales exceeded $45 million and the company posted earnings per share of $0.03. All financial metrics including book-to-bill, gross profit margin, operating expense lines and balance sheet items were at or better than our expectations. More importantly, Luminent management forecasted an excellent outlook
boosting sales and earnings per share guidance for 2001 by approximately 20% relative to our initial forecasts published in our initiation piece on December 4, 2000. We are encouraged by the balance in the company's sales
results with strong performances delivered by the company's transceiver (OC-3/OC-12 and emerging OC-48), DWDM component and access component businesses. Moreover, the company's pipeline of opportunities for its emerging coarse WDM(CWDM) product line is building particularly with Cisco Systems and Extreme Networks. We believe significant revenue opportunities from CWDM modules could emerge as early as Q2:01. Luminent also posted significant efficiency gains resulting in a jump in the company's gross profit margin performance to 34% from 31% in Q3. We attribute the advance to increasing manufacturing volumes that assisted materials purchasing as well as process improvements the new management team implemented within the company's U.S. manufacturing operations (primarily transceiver and laser production operations). The bottom-line is that our thesis on Luminent shares remains in place. Specifically, we believe the company is a significant beneficiary of the
strong secular demand fundamentals for optical components/modules on a global basis with an emphasis on opportunities in the metro/access market. We project the company can post annual growth in sales and earnings per share of at least 45%-50% over our three year forecast period. We are increasing our sales and earnings per share estimate for 2001 to $210 million in sales and $0.13 in EPS from $176 million and $0.09. We are establishing a 2002 forecast of $280 million in sales and $0.18 in earnings per share. We continue to view our estimates as conservative. We are boosting our 12 month target price to $17 ($210 million in estimated 2001 sales and a 13x target market
capitalization to sales multiple) from $14 reflecting the significant increase in the company's guidance as well as a modest increase in our target market capitalization to sales multiple for the company. The increase in our market capitalization to sales multiple assumption is a function of a general improvement in group multiples since our December 4th initiation. We reiterate our BUY investment rating. We believe key trends to track the company's progress relative to our thesis include the rate of new product introductions, design wins with existing customers as well as an expansion in opportunities with emerging customers, the availability of supply and ongoing efficiency gains in manufacturing particularly the ramp in internal laser supply.
Q4:00 Quarterly Review
Luminent delivered Q4:00 earnings per share of $0.03, significantly above our estimate and the First Call consensus of $0.01. Revenues of $45.2 million were 19.0% higher than our official $38 million estimate and our previewed range of $39-41 million. We are raising our Q1:01 revenue projection to $47 million from $40 million and revising our EPS estimate to $0.03 from our previous $0.02 projection. For the full year, our 2001 EPS forecast of $0.13 improves from our previous $0.09 estimate, on higher revenues of $210 million |
