Lumentum (LITE) and Coherent (COHR) have been boosted by increased forecasts for cloud capital expenditures, with investors favoring Coherent before earnings due to lower market expectations and fewer restraints on component supply, Morgan Stanley said in a Monday note.

Morgan Stanley analysts said they see opportunities for positive estimate revisions for both stocks heading into the fiscal Q4 earnings results, although Coherent is currently "better positioned" because of Lumentum's pre-announcement about its expected earnings.

Lumentum's potential growth drivers include increased demand from Google, performance in the electro-absorption modulated lasers sector, and a recovery in the telecommunications sector, the analysts said. However, they said they are cautious in making changes to long-term targets at this time, as the lasers segment is capacity constrained, while the telecommunications sector is still ramping up.

Morgan Stanley maintained Lumentum's stock rating at equal-weight and increased the price target to $92 from $85. Coherent was also kept at equal-weight, with the price target moving to $97 from $92.

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