Owing to increased spending on next-generation wireless communication setups due to the shift in the preferences towards 5G networks and cloud-based technology is driving the demand in the telecom services market. Therefore, the global telecom services market is expected to grow at a CAGR of 5% by 2034.
Moreover, 5G networks are a major breakthrough in telecommunications, offering faster speeds, lower latency, and higher bandwidth than 4G. It holds promise for sectors like automotive, smart cities, and telemedicine. China, the United States, and South Korea are the leading 5G providers, with telecom operators focused on expanding coverage.
Against this backdrop, let’s compare two optical tech stocks, Viavi Solutions Inc. (VIAV) and Lumentum Holdings Inc. (LITE), to determine which optical tech stock shines brighter.
The Case for Viavi Solutions Inc. Stock
With a $2.70 billion market cap, Viavi Solutions Inc. (VIAV) provides network test, monitoring, and assurance solutions for communications service providers, hyperscalers, network equipment manufacturers, original equipment manufacturers, government, and avionics customers. The company operates through three segments: Network Enablement (NE); Service Enablement (SE); and Optical Security and Performance Products (OSP).
On February 13, 2025, VIAV announced that its NITRO Wireless test portfolio had validated the over-the-air (OTA) performance of the Nokia Massive MIMO radio operating in the upper 6 GHz frequency range, a band that will add crucial capacity to existing cell sites to support 5G-Advanced and 6G networks.
VIAV’s stock has gained 20.4% over the past month to close the last trading session at $12.15.
VIAV’s forward EV/Sales of 2.65x is 21.1% lower than the industry average of 3.36x. In terms of forward Price/Sales, it is trading at 2.49x, 25.7% lower than the industry average of 3.35x.
During the third quarter that ended December 28, 2024, VIAV’s revenue increased 6.4% year-over-year to $270.80 million. Its income from operations came in at $22.20 million. In addition, the company’s net income per share came in at $0.04, as compared to a loss per share of $0.01 in the previous-year quarter.
Street expects VIAV’s revenue for the third quarter ending March 2025 to increase 14.7% year-over-year to $282.13 million. Its EPS is expected to be $2.01 for the same quarter. Moreover, the company has surpassed EPS estimates in three of the trailing four quarters.
VIAV’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VIAV has a B grade for Growth, Sentiment, and Quality. It is ranked #5 out of 47 stocks in the Technology - Communication/Networking industry.
Click here for the additional POWR Ratings for VIAV (Value, Momentum, and Stability).
The Case for Lumentum Holdings Inc. Stock
Valued at $5.38 billion by market cap, Lumentum Holdings Inc. (LITE) manufactures and sells optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company operates through two segments: Cloud & Networking and Industrial Tech.
LITE’s stock has plunged 8.7% over the past month to close the last trading session at $77.68.
In the fiscal second quarter that ended December 31, 2024, LITE’s net revenues came in at $402.20 million, while its net loss came in at $60.90 million. The company’s loss per common share came in at $0.88.
Analysts expect LITE’s revenue for the third quarter (ending March 2025) to increase 14.4% year-over-year to $419.09 million. The company’s EPS for the same quarter is expected to be $0.50.
LITE’s bleak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system.
The stock has a D grade for Stability, value, and Quality. Within the same industry, LITE is ranked #44.
In addition to the POWR Ratings I’ve just highlighted, you can see LITE’s ratings for Momentum, Growth, and Sentiment here.
Viavi Solutions vs. Lumentum Holdings: Which Optical Tech Stock Shines Brighter?
The emergence of new applications like distributed sensing and extended reality drives the growing demand for 6G networks. Additionally, the rise of smart city projects and the need for autonomous vehicles require dependable network connectivity, which 6G can provide.
Leading optical tech companies VIAV and LITE stand to capitalize on bright industry growth prospects. However, VIAV’s strong financial results and promising near-term outlook favor it as the better optical tech stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology - Communication/Networking industry here.
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LITE shares were unchanged in premarket trading Monday. Year-to-date, LITE has declined -7.47%, versus a 4.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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