Key Points
Lumentum Holdings' stock dropped 8.3% last week.
StoneX initiated coverage on Lumentum stock today.
Shares of Lumentum are trading at a premium to their historical valuation.
After dropping 8.3% last week, Lumentum Holdings (NASDAQ:LITE) stock is starting the last week of October trading on an auspicious note. With a financial services firm initiating coverage and taking a bullish stance on the developer of optical and photonic technologies, investors have found sufficient grounds to click the buy button.
Lumentum shares closed 8.2% higher from their closing price on Friday, Oct. 23.
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Another firm sees ample room for this tech stock to run
Initiating coverage with a buy rating, StoneX set a $1,200 price target on Lumentum stock this morning. According to Thefly.com, the financial services firm based its outlook, in part, on management's acknowledgment that it has AI-related optoelectronic capacity that is effectively committed into the early part of 2029.
Based on Lumentum’s closing price of $756.17 on Oct. 23, the StoneX price target implies 59% upside.
On Oct. 20, Jefferies also adopted a more bullish perspective on Lumentum stock, raising its price target to $1,250 from $1,200.
In addition to AI computing, Lumentum develops optical and photonic technologies that support the networks and infrastructure for cloud computing and other advanced communications.
Is Lumentum stock a buy now?
While StoneX sees Lumentum stock soaring in the coming months, investors would be smart to take a more cautious approach to the tech stock and not rush out to load up on shares. Lumentum stock is changing hands at 54.1 times operating cash flow, a premium to its five-year average cash flow multiple of 15.4.
For those interested in Lumentum stock, it will be important to see whether the company meets its first-quarter 2027 guidance -- revenue of $1.23 billion to $1.28 billion and adjusted diluted net income per share of $4.05 to $4.35 -- and then reevaluate whether buying shares is a smart move.
Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group and Lumentum. The Motley Fool has a disclosure policy.