Finisar At Risk Of Profitless Prosperity
Stephen Simpson, CFA
Stephen Simpson, CFA
Finisar May And Should Help Start Consolidation
Darspal S Mann
Darspal S Mann
Tue, Oct. 11, 10:53 AM
- On Finisar (FNSR -0.6%) – Price target increased to $39 from $24 (current price $30.68). Analyst Doug Clark: "We expect Finisar to capitalize on key product cycles in the Telecom market, driving further acceleration in revenue growth. Given its vertical integration, Finisar offers substantial potential margin upside, which could result in upside to our above-consensus forecasts. Finisar also trades at a discount to peers and only slightly above its historical P/E."
- On Lumentum (LITE -6.2%) – Price target lowered to $36 (current price $42.45), previously Neutral rated. Valuation (24x 2017 earnings) and telecom investment concerns noted.
- On Acacia Communications (NASDAQ:ACIA) – Maintains at Neutral due to an also expensive 27x forward earnings estimates valuation, though does consider compelling.
Fri, Sep. 9, 3:00 PM
Fri, Sep. 9, 12:45 PM
Fri, Sep. 9, 11:56 AM
- Finisar (FNSR +13.3%) registered record Q1 revenue growth and projected another strong quarter to come in yesterday's earnings report.
- MKM Partners today raises its price target on the company from $21 to $35 (current price $26.33) and upgrades its rating to Buy citing strong demand, tight supply and product categories leadership.
- Finisar CEO Jerry Rawls issued further favorable commentary on the Q1 earnings call, noting optical components demand remains strong worldwide resulting from long haul metro and wireless rollouts by major carriers. Demand in China and North America is highlighted as particularly strong.
- The company is presently up around 32% on the month, 50% over the last three and nearly 80% on the year.
Fri, Sep. 9, 9:17 AM
Thu, Sep. 8, 5:41 PM
Thu, Sep. 8, 4:16 PM
- Finisar (NASDAQ:FNSR) CEO Jerry Rawls attributes the strong quarter to 100Gb/s transceivers (CFP, CFP2, CFP4, and QSFP28 form factors) and wavelength selective switches demand.
- Telecom product sales ($22M) grew 29% Q/Q and gross margin increased to 33.1% vs. 30.6% Q/Q. Operating expenses increased to $69.3M vs. $66.2M Q/Q while operating margin improved to 12.8% from 9.8% Q/Q.
- Cash, cash equivalents and short term investments increased $31.3M Q/Q to $593.8M.
- Projects Q2 revenue of $355M-$375M, gross margin of 34%, operating margin of 14.2%-15.3% and EPS of $0.44-$0.50.
- Conference call
- Earnings slides
- Press release
Thu, Sep. 8, 4:01 PM
Wed, Sep. 7, 5:35 PM
Tue, Sep. 6, 9:57 AM
- Sets $28 price target (current price $22.92).
- Analyst Patrick Newton notes previously held overblown concerns regarding a competitive data center pricing environment and lack of margin expansion. Industry checks, management comments and legacy product demand trajectory also cited in the shift.
- Newton projects 2017 revenue of $1.41B and EPS of $1.40 along with 2018 revenue of $1.55B and EPS of $1.65.
- Finisar (FNSR +2.9%) is up around 17% on the month, around 31% over the last three and nearly 50% on the year.
Fri, Jun. 17, 3:00 PM
Fri, Jun. 17, 9:14 AM
Thu, Jun. 16, 4:04 PM
Wed, Mar. 16, 1:52 PM
- Oclaro (OCLR +5.4%) has begun producing 100G QSFP28 optical transceivers that respectively have 2km and 10km ranges. The products are meant for 100G data center switch interconnects - a fast-growing market thanks to the insatiable capacity/performance needs for Internet giants - as well as conventional router and optical transport system interfaces in core telecom networks.
- The company has also unveiled 25Gbps laser diodes for its 25G and 100G transceivers - Oclaro argues its support for non-hermetic packages (lowers a device's footprint and costs) will aid data center adoption.
- The announcements come ahead of the optical networking industry's annual OFC conference (runs from March 20-24). Oclaro plans to demo both its 100G products and next-gen 400G offerings.
- Last week, rival Finisar (FNSR +3.7%) mentioned on its FQ3 earnings call (transcript) it expects QSFP28 100G transceiver sales to ramp this year thanks to strong data center client demand. CEO Jerry Rawls: "The growth rate [for QSFP28] will be very impressive for us and probably the highest growth part of any of our product lines that we sell."
Fri, Mar. 11, 1:21 PM
- Optical component vendors Fabrinet (FN +6.3%), Alliance Fiber (AFOP +3.8%), and NeoPhotonics (NPTN +4.6%) are rallying after Finisar (FNSR +18.3%) posted mixed FQ3 results, offered in-line FQ4 sales guidance and above-consensus EPS guidance, and forecast datacom sales would pick up as Web 2.0/hyperscale clients deploy 100G transceivers. Telecom chipmakers Inphi (IPHI +3.8%), Cavium (CAVM +3.9%), and AppliedMicro (AMCC +4.4%) are also doing well. The Nasdaq is up 1.3%.
- Craig-Hallum's Richard Shannon and B. Riley's Dave Kang have upgraded Finisar to Buy. Shannon thinks the FQ4 guidance suggests Finisar could be reaching a turning point, and sees 100G component adoption providing a margin boost. Kang is also upbeat about 100G sales.
- Piper's Troy Jensen (Overweight rating, target hiked by $3 to $20): "The upbeat FQ3 results and forward guidance were driven by robust demand for 100G Telco and Datacom optics. We believe telco strength continues with demand from China driving near-term upside and U.S. metro deployments will act as a tailwind in the back half of 2016 ... We also believe Finisar is one of the first to materially benefit from the 100G Datacom cycle, and expect QSFP28 [100G transceivers] to grow meaningfully for the next several quarters. We are expecting the real QSFP28 inflection to begin in 2H16, and believe this accelerated demand will be reflected in the July quarter guide."
- On the earnings call (transcript), CEO Jerry Rawls stated Chinese demand is benefiting from long-haul and wireless buildouts by the country's big-3 carriers, North American demand from metro buildouts, and broader telecom demand from sales of wavelength selective switches, ROADM line cards, and 100G/200G transceivers. He added Finisar is capacity constrained for the aforementioned products, and is building capacity to address the issue.
- Component makers rallied last month in response to good numbers from Oclaro and Fabrinet.
Fri, Mar. 11, 12:46 PM