According to Lumentum Holdings Inc. (NASDAQ:LITE) CEO Michael Hurlston, the company is now almost sold out of components for 2029, as he said in a recent interview. Just six months ago, he said Lumentum was on track to sell out by 2028. The demand outlook is strong, but Lumentum’s strong demand raises the question of how much growth is already priced in. Meanwhile, see our Top 10 Co-Packaged Optics (CPO) Stocks to Buy in 2026 to see the 5 companies that rank higher than LITE.
Demand Isn’t the Problem
The underlying details paint a more limited picture. Lumentum cannot meet about 70% of demand for certain products through next year. For some other products, supply constraints will leave 30% of demand unmet through 2028.
According to Wedbush Securities’ Matt Bryson, this creates a favorable backdrop for optical-input suppliers such as AXT and for foundry and silicon photonics companies, including Tower Semiconductor and GlobalFoundries. The challenge is not a lack of demand but limited capacity. LITE’s growth will depend on how quickly it can expand production. Lumentum’s challenge is turning strong demand into actual sales, but which other aggressive growth stocks do Wall Street analysts see as having room to run?
Is a 46x Multiple Fair?
Lumentum’s forward P/E stands at 45.70x, roughly 22% above its five-year average of 37.51x. This indicates that investors are paying more than they have historically. That premium reflects expectations for rapid earnings growth. EPS is projected to grow 151.24% this fiscal year from a small base, followed by another 64.80% increase next year. Based on current estimates, the P/E could decline to roughly 28x on 2028 earnings and 21x on 2029 earnings. This means much of the earnings investors are paying for today is expected to arrive within one to three years. The company’s near sold-out capacity lends more support to those projections.
The stock is not undervalued, but its premium could be reasonable if Lumentum adds capacity as planned. Demand is already there; production capacity is now the key factor limiting growth.
According to our database, the number of hedge funds holding Lumentum fell from 123 at the end of Q1 2026 to 111 at the end of Q2 2026. Short interest reached 8.96% of float as of September 30, 2026.
While demand remains firm and Wedbush sees potential benefits for Lumentum’s suppliers, investor positioning tells a more cautious story. The decline in hedge fund ownership and short interest approaching 9% suggest that some investors remain skeptical of the premium valuation. Whether Lumentum can build capacity quickly enough will determine if its premium valuation can hold.
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