Northland: The transaction between Mawell Technology and Lumentum highlights the scarce value of InP devices, benefiting related U.S. concept stocks

According to Golden Ten Data APP, after Marvell Technology (MRVL.US) announced its deal with Lumentum (LITE.US), Northland Capital Markets upgraded the ratings of Coherent (COHR.US) and Applied Optoelectronics (AAOI.US) on Monday.

“Although the rally in the AI optical module sector driven by rumors related to Marvell Technology was short-lived, it highlights one point: for major AI chip suppliers, scarce photonic device capabilities are also valuable in addition to computing and networking integrated circuits,” wrote Northland analyst Tim Savageaux in a client report. “While we remain cautious on optical modules, the core indium phosphide (InP) device capabilities of Applied Optoelectronics and Coherent, combined with the significant pullback in both companies’ share prices, prompt us to upgrade their ratings and maintain our respective target prices of $120 and $280.”

Savageaux upgraded the ratings of Coherent and Applied Optoelectronics from “Market Perform” to “Outperform.”

He further stated that this deal is also positive for MACOM (MTSI.US) and MaxLinear (MXL.US) in the photonic integrated circuit field, because MACOM possesses indium phosphide devices. “We continue to believe that MACOM's photonic capabilities are largely underappreciated by the market, and the same goes for MaxLinear's increasingly strong position in the optical DSP field,” Savageaux added.