Lumentum Stock Eyes Worst Month Ever on Huawei Backlash

LITE joins a myriad of chip stocks in the red today

Lumentum Holdings Inc (NYSE:LITE) is one of manytech stocks in the red this morning, as headwinds from Huawei Technologies take over mere days after President Donald Trump banned U.S. companies from supplying components to the China telecom concern. Specifically, Lumentum announced that it's halting shipments to Huawei, which accounted for 18% of its revenue last quarter. In response, the firm was also forced to lower its quarterly outlook.

On the charts, LITE is down 2.9% at $44.98 today, and has lost 27% so far in May -- pacing for its worst month ever. What's more, the security has shed 19% in just the past week. The technology name is also pacing for its third straight close below the 80-day moving average, and is trading in territory not charted since mid-February. From a broader perspective, however Lumentum stock remains 10% higher year-to-date.

Analysts are beginning to react to this morning's news, with Needham trimming its price target on LITE to $62 from $70. The equity could be vulnerable to more analyst backlash; all 11 covering firms sport "buy" or "strong buy" ratings, with not a single "sell" in sight. Plus, Lumentum stock's average 12-month price target of $73.57 comes in at a 64% premium to current levels.

Short sellers, on the other hand, have retreated from the security. During the past two reporting periods, short interest dropped 13.4% on LITE, and now accounts for 10.5% of the stock's total available float. At the stock's average pace of daily trading, it would take shorts over a week to buy back their bearish bets.