A Fiberoptic Burning Too Bright by Tiernan Ray
Summary: After tanking during the dot-com implosion, fiberoptic stocks are finally starting see the light of day as falling storage prices and increased computer dependence find users thirsting for more bandwidth. But Barron's Plugged In editor Tiernan Ray says the enthusiasm surrounding the recent (June 7) IPO of fiberoptic company Infinera Corp. (INFN) may be overdone. Shares jumped 52% on their initial day of trading, and are up another 27% since to $25. The three other fiberoptic IPOs have dropped up to 25% from their initial closing prices, a tread that doesn't bode well for Infinera. Also disconcerting is its rich 20x price-to-trailing 12-month sales ratio. Even a rosy forecast from research firm Dell'Oro, which estimates 22% sales growth this year, can't justify such a multiple. And even if one assumes an exceptional tripling of sales over the next year, a 7x price-to-sales multiple would still put it far ahead of much-larger Ciena Corp. (CIEN) -- which itself projects 20% sales growth next year. Says Ray, "To go whole-hog on its pricey stock seems foolish at a time when fiberoptics is just crawling back to respectability."