Why Lumentum Holdings Is a Risky Bet Despite iPhone Gains

Lumentum Holdings (NASDAQ: LITE) has set the stock market on fire this year as anticipation that it might win big with Apple's latest-generation iPhones fueled its rise. The optical components specialist has been touted to supply 3D sensing chips for enabling augmented reality applications in the Cupertino company's latest device.

Now that Apple has launched its new devices and equipped the premium iPhone X with features such as Face ID and Animoji, which are made possible by 3D sensing chips, Lumentum investors should be a happy lot. After all, the company has received $200 million worth of orders for its 3D sensing chips within the last six months, mostly from a single customer.

By comparison, Lumentum had just $5 million in 3D sensing revenue during its last reported quarter, which means that it is on track to record windfall gains from Apple's latest flagship. But investors shouldn't remain fixated on this single design win, as Lumentum's iPhone success could be short-lived.

Source: Fool.com