Amid the AI boom, data centers are sending and receiving so much data that they are embarking on “the largest expansion of the internet in our lifetime,” Lumen Technologies (NYSE:LUMN) Chief Technology Officer Dave Ward recently said, according to Fierce Network. That makes the idea of finding the best fiber stocks much more appealing.
Lumen, a cloud service and internet service provider, ordered 10% of Corning’s (NYSE:GLW) global fiber capacity for the next two years, the website noted. Moreover, Lumen disclosed that it had obtained $5 billion of new fiber service deals and was close to signing contracts valued at another $7 billion.
Lumen’s shares jumped from a low of $2.51 on Aug. 5 to $5.59 at the end of the day on Aug. 9. Corning’s shares barely reacted to the news, as they finished the week at $38.45 versus their low of $27.18 on Aug. 5. Still, with the demand for fiberoptics surging, I believe that firms which sell the material, along with those that sell equipment which is used to enhance fiber’s utility, will get a huge lift within the next year.
Here are the three best fiber stocks to buy now.
Lumentum (LITE)
Lumentum (NASDAQ:LITE) produces optical fibers and fiber-based components. The firm also develops and markets equipment that allows information to be transmitted over high-capacity fiber optic cables.
On the company’s earnings call for its fiscal third quarter (ending March 30), CEO Alan Lowe reported that Lumentum was “partnering with cloud and AI infrastructure customers on new innovative solutions to scale data center infrastructure that leverages (its) extensive portfolio of in-house photonics and manufacturing technologies.” One example of this strategy involves Lumentum using its photonics technology to produce less power-intensive data switches.
Additionally, the firm is developing new products in 2024 and 2025 that will help data centers more efficiently transmit data over fiber optics, and it is working on increasing the output of its products for data centers.
Analysts, on average, expect the company’s earnings per share to jump to $1.67 in 2025 from 98 cents this year.
Lumentum’s high exposure to fiber optics and its strong, expected growth make Lumentum one of the best fiber stocks to buy.
Corning (GLW)
Corning is far from a pure play on fiber optics. It is engaged in many other types of businesses, such as selling glass for flat panel displays, offering materials used to make glass, and marketing substances used to enhance vehicle emissions controls.
Nonetheless, the rapidly growing demand for the firm’s fiber optic products, including its updated connectivity offerings, could be a needle mover for GLW stock. Indeed, on July 3,1 Deutsche Bank upgraded the name to “buy” from “hold,” citing the opportunities being created by its “new optical connectivity products for generative AI,” Seeking Alpha reported.
Deutsche Bank expects the company’s optical business to expand at a compound annual growth rate of 13% between 2024 and 2027 and placed a $46 price target on the shares. The bank also predicts that increased fiber deployments by telecom companies will boost the company’s fiber optics business.
Despite these sizeable opportunities, the shares trade at a relatively low forward price-to-earnings ratio of 20x.
Belden (BDC)
Belden (NYSE:BDC) offers a wide variety of fiber optic cables. It also provides many other solutions for data centers, including power, infrastructure, and cooling solutions, as well as racking, monitoring, and airflow management products.
Meanwhile, on July 1, Belden closed its acquisition of Precision Optical Technologies, significantly increasing its exposure to the fiber market. Precision develops and markets optical transceivers.
CEO Ashish Chand on July 1 said in a statement that “as networks are upgraded and bandwidth demands increase, Precision Optical Technologies’ products will be critical components as fiber deployments accelerate.”
Analysts, on average, expect the company’s earnigns per share to surge to $7.49 in 2025 from $6.01 in 2024.
Belden’s key acquisition and strong, expected growth make it one of the best fiber stocks.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
