15 Jan Lumentum (LITE) – A key Apple Supplier.
You know the old saying about who made the most from the gold rush? The people who sold the shovels.
Well, we have uncovered a little known technology company that is busy selling its shovels to the largest company in the world – Apple.
Lumentum (LITE) is a key Apple partner. The $8billion company makes the laser components used in Face ID and the sensors used for augmented reality found on the back of new iPhones and iPads.
However, the bigger story is a breakthrough the company recently made with the sensors used in LiDAR, the light-based radar common on Self-Driving vehicles.
LiDAR is a type of light detection and ranging radar. The sensor sends out a laser light to the target and the distance away is measured almost instantly by the reflection back to the sensor. LiDAR will build extremely accurate 3D maps in real-time.
Most companies working on AVs, the exception being Tesla, integrate LiDAR in the detailed maps at the heart of their autonomous software. The big problem has been LiDAR is expensive.
The new Lumentum chips send more powerful light arrays while being more energy-efficient. They are also cheaper to produce. That’s a winning narrative for an investment story that is certain to get a lot of play moving forward.
This adds a new revenue line to an already profitable business. Earnings grew at 425% in 2020 yet the stock is trading at 15x forward earnings, which is pretty cheap.
We like these kinds of businesses. LITE uses the mega sales giant that is Apple to do its magic and sell more and more phones, each one of them requiring LITE products. That should be enough on its own to see earnings grow in 2021, but with Lumentum we also get the added bonus of a catalyst in the form of the LiDAR chips to kick earnings even higher.
Given the size of the potential self-driving market the stock could easily trade to $145 during the next 12 months, a gain of around 36% from the current price of $106