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Wed, Feb. 3, 1:32 PM
- Though the Nasdaq is down 1.5%, many telecom equipment and optical component firms are rallying after network test equipment/telecom software provider Viavi (VIAV +17.6%) and optical component vendor Oclaro (OCLR +11.4%) beat calendar Q4 estimates and issued strong Q1 guidance.
- The list includes optical networking hardware firms Ciena (CIEN +3.9%) and Infinera (INFN +4.9%), component vendors Finisar (FNSR +5.3%) and Alliance Fiber (AFOP +2.2%), Wi-Fi hardware provider Ruckus (RKUS +3.5%), and VoIP and 4G signaling hardware/software firm Sonus (SONS +2.5%).
- Component maker NeoPhotonics (NPTN +14.7%) is posting double-digit gains, aided by an upgrade to Strong Buy from Raymond James. RJ says its checks point to strong sales fueled by Chinese demand and 100G metro optical buildouts.
- Oclaro guided for calendar Q1 (FQ3) revenue of $97M-$100M, soundly above a $90M consensus. The FQ2 beat was fueled by a 21% Y/Y increase in 100G product sales (53% of total revenue), which offset a 7% drop in sales of 10G and lower-speed products (35% of revenue). (earnings release)
- Viavi's beat was aided by a 5.7% Y/Y sales increase for the company's core network enablement (test instrument) business. The unit delivered Y/Y sales growth for the first time in five quarters. (earnings release)
- Viavi and Oclaro's numbers came shortly after optical component contract manufacturer Fabrinet soared in response to an FQ2 beat and strong FQ3 guidance. Fabrinet's revenue from 100G programs nearly tripled Y/Y in FQ2.
Fri, Jan. 8, 11:21 AM
- Believing slowing growth and tough competition will weigh on optical component vendors, Barclays' Joseph Wolf has downgraded Finisar (FNSR -3.3%) to Equal-Weight and Lumentum (LITE -0.2%) to Underweight. His targets are respectively $17 and $19.
- Wolf on Finisar: "We believe that investors should not be too excited by the seasonal uptick in 3Q and 4Q and while metro [networks] could be a driver in telecom we do not think it is enough to support double-digit growth or significant margin expansion." He also thinks the top-line, competitive, and margin pressures that weighed on Finisar in 2015 could do so again in 2016.
- Wolf on Lumentum: "Our main concern is that optimism surrounding the opportunity in telecom is at its peak and that following the next few quarters, we do not have a clear line of sight on a next leg for growth." He sees optical gross margin remaining under pressure for the foreseeable future (industrial lasers are considered a relative strong spot), and still thinks Finisar warrants a higher multiple than Lumentum due to its strong datacom growth.
- Needham offered a more bullish take on Lumentum last week, naming it (along with Oclaro and Fabrinet) a top optical component pick.
Dec. 11, 2015, 6:10 PM
- On a brutal day for equities, Lumentum (LITE +4.1%), Oclaro (OCLR +1.5%), NeoPhotonics (NPTN +0.8%), and Fabrinet (FN +0.2%) stayed green after peer Finisar (FNSR +22.3%) beat FQ2 estimates on the back of strong telecom optical component demand, and offered slightly soft but better-than-feared FQ3 guidance.
- On its earnings call (transcript), Finisar forecast telecom component sales will rise Q/Q again in FQ3 thanks to continued strength for 10G tunable transceivers and wavelength selective switches, as well as healthy Chinese demand. Datacom component sales are expected to "decline a bit" Q/Q, as 100G Ethernet transceiver demand is offset by "lumpiness in demand at multiple large data centers" for 40G Ethernet transceivers, and lower Ethernet transceiver sales for wireless applications.
- When asked about Chinese sales (under pressure for many telecom suppliers in recent quarters due to soft 4G network spending), CEO Jerry Rawls stated several catalysts were boosting demand. "Wireless is pretty strong in China. I think we don’t participate in the [passive optical network] market, but they are spending a lot of money on [it]. The long-haul upgrade program for 100-gig coherent [optical networks] is well underway and is moving in a very positive direction ... In addition they are building a number of big data centers over there..."
- Needham's Alex Henderson reiterated a Buy rating and $18 target on Finisar. "We had been bracing for worse, but improvements out of China and strong volumes were enough to offset pricing pressures in Data Comm. Further, improving demand in ROADMs and T-XFP [transceiver] 10G metro aggregation products helped results. Despite the solid quarter against low expectations, the guide was still softer than our and Street estimates. As a result, we are trimming estimates. But we think we have not only found a base, but the bad news appears to be over for Finisar."
- The gains came a day after several telecom equipment and optical component makers sold off in response to Ciena's disappointing guidance.
Dec. 11, 2015, 12:47 PM
Dec. 10, 2015, 5:36 PM
Dec. 10, 2015, 4:12 PM
- Finisar (NASDAQ:FNSR) has jumped to $13.05 after hours after posting an FQ2 beat. FQ2 sales strength is attributed to strong demand for Finisar's 100G Ethernet transceivers, as well as rising sales of 10G tunable transceivers, and wavelength selective switches (WSS) among telecom clients.
- FQ3 guidance is for revenue of $300M-$320M and EPS of $0.19-$0.25. That's below a consensus of $318.6M and $0.24 at the midpoints, but better than feared given low expectations. Shares went into earnings less than a dollar above a 52-week low of $10.66.
- Top-line performance: Datacom revenue rose 0.2% Q/Q and 8.3% Y/Y to $233.8M; 100G transceivers were a strong point, while 40G transceiver sales fell following a record FQ1. Telecom revenue rose 8.2% Q/Q and 7.8% Y/Y to $87.4M.
- Financials: Gross margin (non-GAAP) fell 20 bps Q/Q and 110 bps Y/Y to 30%, but was in-line with guidance. FQ3 GM guidance is also at 30%. Operating expenses fell by $0.4M Q/Q and rose by $0.7M Y/Y to $68M. Finisar's cash balance rose by $25.1M Q/Q to $520.8M; convertible debt totaled $226M at quarter's end.
- Finisar's FQ2 beat, earnings release
Dec. 10, 2015, 4:02 PM
Dec. 9, 2015, 5:35 PM
Oct. 28, 2015, 1:42 PM
- Optical component vendors NeoPhotonics (NPTN +12.6%), Oclaro (OCLR +9.4%), Viavi (VIAV +6.9%), Finisar (FNSR +3.8%), Alliance Fiber (AFOP +4%), and Fabrinet (FN +3.1%) are rallying after optical transport hardware vendor Infinera (INFN +14.6%) beat Q3 estimates and issued strong Q4 guidance. Infinera rival Ciena (CIEN +3.4%) hit yesterday by a bearish Off Wall Street report, is also doing well.
- For Oclaro, the shoe is now on the other foot: Infinera rallied last week after Oclaro pre-announced strong calendar Q3 sales.
- On the earnings call (transcript), CEO Tom Fallon stated Infinera saw "a substantive increase" in sales of its Cloud Xpress data center interconnect platform. Cloud Xpress customers now stand at 14 (up from 12 as of July), and growing machine-to-machine traffic within data centers is expected to boost demand for 100G interfaces. Infinera's core long-haul system sales were also healthy.
- Fallon did admit Infinera is seeing "some conflicting signals" regarding market demand. "On one hand, we are seeing some pockets of slightly softening demand. On the other, we're seeing positive indications in the industry, such as lead-times extending for optical components and continued capacity expansion from cloud providers." The optical component remarks might be contributing to today's rally in component makers.
- Needham's Alex Henderson, who upgraded Infinera earlier this month, is reiterating a Buy rating today. "Infinera reported a strong quarter and offered a strong guide in its first quarter with Transmode partially in the base and fully in the CY4Q guidance. Negative commentary on the Street on INFN and CIEN regarding industry price pressure has set-up a solid entry point and we expect investors will take advantage of this recent weakness."
Sep. 11, 2015, 12:45 PM
- Finisar (FNSR -18.4%) has plunged to its lowest levels since 2012 after missing FQ1 estimates, providing soft FQ2 guidance, and announcing chairman Jerry Rawls is replacing Eitan Gertel as CEO.
- Optical component/module peers Alliance Fiber (AFOP -4.6%), Lumentum (LITE -2.3%), and Oclaro (OCLR -6%) are also off, as are equipment vendors Infinera (INFN -3.8%), Ciena (CIEN -2.8%), Adtran (ADTN -2.3%), and Calix (CALX -2.5%). The Nasdaq is nearly flat.
- During Finisar's earnings call (transcript), Rawls noted his company continues to "see a high level of competition," and is aiming to cut operating expenses to ~20% of revenue from FQ1's 21.8%. CFO Kurt Adzema mentioned wireless and legacy 100G datacom component sales were soft in FQ1, and that Finisar is now seeing "some lumpiness" for 40G data center sales.
- Adzema insisted the competition (much of it around low-end/10G products) is business as usual. "The lower end products always [face] competition from non-tier 1 companies and in some period of time, it just takes whether it’s a one year or a three year or whatever the period, tier 2 competitors always catch up." Rawls promised 25G/100G Ethernet data center upgrade cycles would drive growth next year.
- MKM and B. Riley have downgraded Finisar to Neutral, and several other firms have cut targets. MKM's Michael Genovese cites datacom competition/price pressure, and states he's "becoming less convinced that there is an easy path to industry consolidation that will help alleviate ... significant Optical component industry challenges,"
- At the same time, Genovese defends Ciena, Infinera, and Lumentum (formerly JDS Uniphase's component unit). "Ciena and Infinera actually slightly benefit from more [component] competition and lower prices since they are customers ... we believe the negative revisions in Finisar's outlook are much more on the Datacom side than on the Telecom side ... Finisar is an incumbent that derives 75% of overall revenues from Datacom, while Lumentum is a relatively new challenger with only 20% of revenues from Datacom ... we are much more confident in the demand and pricing environments for 100G Telecom (Metro and [long-haul]) components than we are for Datacom, and Lumentum has significantly more exposure to 100G Telecom than Finisar."
Sep. 11, 2015, 12:44 PM
Sep. 11, 2015, 9:11 AM
Sep. 10, 2015, 5:36 PM
Sep. 10, 2015, 4:10 PM
- Along with its FQ1 results, Finisar (NASDAQ:FNSR) announces CEO Eitan Gertel has resigned. Chairman Jerry Rawls (70) is once more Finisar's CEO - he previously held the job from 1999-2008 before stepping down to make way for Gertel (52). Rawls will remain Finisar's principal executive.
- In addition to missing FQ1 estimates, Finisar is guiding for FQ2 revenue of $304M-$324M and EPS of $0.20-$0.26, below a consensus of $328M and $0.28.
- Segment performance: Datacom optical component/module revenue fell 3.6% Q/Q and 3.3% Y/Y in FQ1 to $233.3M; sales were up 8.5% Y/Y in FQ4. Telecom component/module revenue fell 1.9% Q/Q and 6.6% Y/Y to $80.7M. Q/Q growth was hurt by one fewer week.
- Financials: Gross margin was 30.2%, -10 bps Q/Q and -180 bps Y/Y, and slightly below guidance of ~30.5%; FQ2 GM guidance is at.~30% Operating expenses fell by $1M Y/Y to $68.4M. Finisar ended FQ1 with $495.7M in cash/short-term investments, and $223.7M worth of convertible debt.
- Shares have fallen to $13.65 after hours.
- FQ1 results, PR, earnings slides (.pdf)
Sep. 10, 2015, 4:02 PM
- Finisar (NASDAQ:FNSR): FQ1 EPS of $0.23 misses by $0.03.
- Revenue of $314.03M (-4.2% Y/Y) misses by $4.68M.
- Shares -9%.
Sep. 9, 2015, 5:35 PM
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