Analysts Are Even More Bullish on Finisar

What will analysts say at Finisar's (FNSR) Investor/Analyst Day on October 7th? I expect analysts will raise estimates and ratings, on the basis that last week Finisar just raised earnings estimates much higher than any current analyst estimate.

Analysts' latest remarks on Finisar-Optium (OPTM) combo

John Harmon, vice president, equity research at Needham & Co. said, "Given Finisar's intention to move into telecom, we think the merger makes great sense by improving profitability and eliminating the enormous need to develop products that Optium already has," in a note to investors. Harmon, who had already rated Finisar as a "Buy," with $4 Target, raised FY08 revenue and EPS estimates to $444 million and $0.07 from $432 million and $0.06; he also raised FY09 estimates to $512 million and $0.14 from $498.

Paul Bonenfant, communications components analyst at Morgan Keegan, wrote in a note, "We like the deal, the combination makes sense with virtually no product overlap and potential for revenue synergies in a shared customer base."

"The combined companies' competitive positioning is strong with only JDSU having the breadth of products (and more) to compare favorably to the new combination, with overlap in JDSU's transmission (transceivers, transponders) and transport (optical switching/ROADM, optical amplifiers (OAs), and to a much lesser extent its integrated photonics (optical chip technologies and passive optical components) pisions within its Optical Communications (OptComm) business unit," Bonenfant wrote in assessing the combined company's competitive position. "Opnext has a competitive offering across its transceiver and transponder products lines, and similarly lacks exposure to OAs and passive components, but also lacks a ROADM play."

Bonenfant maintained his "Outperform" rating and said his company would continue to recommend Finisar on a standalone basis, noting he could see the stock worth nearly $3.00 per share.

Jefferies & Company Analyst John Lau has a hold rating with a $3 Target.

On September 2, analysts Sam Dubinsky at Oppenheimer & Co reinitiated coverage of Finisar Corporation with an "outperform" rating. The target price is set to $2.

FNSR  now has a forward P/E of 5 and a growth rate of twice that of JD Uniphase (JDSU) Which has 10x forward P/E.

With the average analyst price target 200% higher than the stock price, it makes far more sense to be a buyer of FNSR than a seller, at such a oversold share price the rewards in the near term should be excellent.

Disclosure: Long FNSR.