QS Research · Michael Burry's Scion Capital analyst template · 2006
Lumentum Holdings Inc. (LITE)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -94% · downside -95% · upside -91%
Section 13's base is wrong for a cyclical: it anchors on TTM EBITDA of $1.02B (N14), a spike off FY2022-FY2026 average operating income of only $19.7M and average FCF of $101.3M (S2). I therefore use one normalized-FCF base for all cases: $101.3M x 25x = $2.53B EV + $0.55B net cash = $3.08B / 90.70M = about $34/share, versus $524.32 today, while TTM FCF is $356.3M (N18) and TTM EBIT is $877.9M (N13). At 16.6x-38.4x normalized FCF the range is about $25-$49/share, so even the top peer multiple is about 91% below the price; the market is capitalizing the AI upcycle and the Marvell deal, not cycle earnings. The formula gives a short, with medium conviction because the all-stock Marvell deal and 8.5% short interest can distort price before normalized value asserts itself.
Key numbers
- Share price: $524.32
- Market cap: $47.56B
- Latest financial period: TTM to Sep 26, 2026
- Revenue (TTM): $3.74B
- EV / EBITDA (TTM): 45.9x
- Price / book: 10.40x
The 15 boxes
- ✓ 1. Long-form business notes
Lumentum's FY2026 10-K reports one reportable segment, with revenue disaggregated by Components and Systems and by geography, serving cloud/AI/telecom, consumer and industrial markets. The cycle is visible in the DATA: revenue was $1.77B in FY2023, $1.36B in FY2024 and $3.01B in FY2026, while gross profit and operating income swung from $251.5M and -$434.0M in FY2024 to $1.26B and $524.8M in FY2026. Net income is not a clean operating measure: FY2025 net income was +$25.9M despite a -$180.1M operating loss, and FY2026 net loss was -$6.94B despite +$524.8M operating income. The sources provide annual figures only; no TTM data is available here.
- ✓ 2. Competitive advantage
The margin record says cyclical, not durable: gross profit fell from $569.0M (FY2023) to $251.5M (FY2024) and rebounded to $1.26B (FY2026), and operating income ran three straight loss years (FY2023-FY2025) before one $524.8M profit year (FY2026). The disclosed moat is physical and legal — ~1,900 owned patents, owned wafer fabs plus contract manufacturing, 13,757 employees — but the 10-K names no competitor and concedes that competitors are also customers. The clearest evidence of weak customer switching costs is Huawei, once the largest networking customer in China, being cut off in early calendar 2024 and buying substitute product from competitors; supplier-side power is also weak, with sole or limited sources on certain components.
- ✓ 3. 10-Q takeaways
Q1 FY2027 (quarter ended 2026-09-26) shows a sharp cyclical upswing: revenue was $1,262.6M, up 136.5% YoY, gross margin 51.0% vs 34.0%, and operating income 28.5% of revenue. Net income was $360.3M, but it included a $6.9M gain on sale of business and a $37.0M discrete tax benefit, while R&D carried $89.7M of SBC from an executive retirement modification. Cash fell $771.3M to $1,272.2M on an $804.4M financing outflow despite $267.7M operating cash flow, and the 10-Q adds FCC optical-transceiver restrictions and the pending Marvell merger as new risks.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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