Citi's thesis regarding strong CY2H 2007/FY1H 2008 financial and stock performance hinges on the ramp with Cisco in 10G modules for Cisco's enterprise switching line. They believe Finisar has already started to ship 10G SR (short reach standard for single-mode fiber) products to Cisco and is about one month away from full qualification on the much larger 10G LRM (long reach standard for multimode fiber) opportunity.
Reiterates 12-month price target of $5 and Buy rating on FNSR but thinks in the next month or so the stock will likely pull back to $3 or slightly below. Frm would likely be aggressive buyers anywhere below $3. At $3 the stock would be trading at just 11.5x CY 2008 EPS of $0.26.
Notablecalls: Expect to see some selling pressure on FNSR over the next couple of days.
FNSR 1-yr chart: