Better Buy: Lumentum vs. IIVI
In an increasingly connected world, industrial lasers and photonics hold a lot of promise. Modern networking systems and devices make use of these technologies, and Lumentum (NASDAQ: LITE) and II-VI (NASDAQ: IIVI) have done well in recent years as a result -- even though demand from some customers may be drying up this year. Shares of both companies have pulled back as of late, so investors may be wondering which would be the better choice to buy now.
As technology component manufacturers, Lumentum and II-VI have highly cyclical businesses that are sensitive to customer demand. But while 2020 has been a total mess for the economy overall, networking sales did well through the first half of the year as many organizations scrambled to update their operations to adapt to shelter-in-place orders and work-from-home requirements.
However, telecom and networking supplier giant Ciena (NYSE: CIEN) recently revealed it is experiencing a sharp slowdown during the second half of the year. As Lumentum and II-VI both provided their latest quarterly updates earlier than Ciena, it's possible they had less visibility on future demand when they reported. As a result, both stocks are well off of recent highs, with Lumentum down 6% year to date and II-VI up 12%. But with market caps of just $5.6 billion and $3.9 billion respectively, both of these component makers are still relatively small and could have much room to grow in the decade ahead.
Source Fool.com
