Northland: Marvell Technology and Lumentum deal highlights the scarcity value of InP devices, bullish for related US-listed concept stocks.

Northland Capital Markets on Monday upgraded Coherent (COHR.US) and Applied Optoelectronics (AAOI.US) following Marvell Technology, Inc.'s (MRVL.US) announced deal with Lumentum (LITE.US). "While the AI optical module sector's rally driven by Marvell Technology, Inc.-related rumors proved fleeting, it highlighted one point: for large AI chip suppliers, scarce photonic device capabilities are valuable alongside computing and networking ICs," Northland analyst Tim Savageaux wrote in a note to clients. "While we remain bearish on optical modules, Applied Optoelectronics' and Coherent's core indium phosphide (InP) device capabilities, combined with the significant pullback in both companies' share prices, prompted us to upgrade both ratings and maintain our respective price targets of $120 and $280." Savageaux upgraded Coherent and Applied Optoelectronics from "Market Perform" to "Outperform." He further stated that the deal is also bullish for MACOM (MTSI.US) and MaxLinear (MXL.US) in the photonic integrated circuit space, given that MACOM possesses indium phosphide devices. "We continue to believe that MACOM's photonic capabilities are largely unrecognized by the market, as is MaxLinear's increasingly strong position in optical DSP," Savageaux added.