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Wednesday, February 06, 2008

Finisar Jumps on Good News from JDS Uniphase

Today Finisar (FNSR charts) is up 11% after the good news from its competitor, JDS Uniphase Corp. (JDSU) lifted that that stock 28%.

Yesterday JDS Uniphase reported fiscal second-quarter revenue rose 9% to $399.2 million. FY Q2 net income fell 8.6% to $21.2 million, or 9¢ per share, from $23.2 million, or 10¢ per share, a year earlier. If you exclude onetime gains and benefits, JDS said earnings would have totaled 22¢ per share in the quarter ended Dec. 29.

On that basis, JDSU easily analyst consensus for earning of 12¢ per share on revenue of $386.4 million.

Even better news at a time the market is full of bad news, JDSU indicated their Q3 revenue might also beat analyst estimates of $390.2 million. JDSU predicted sales of $380 million to $402 million.

This great news from JSDU was enough to have FNSR up 11% so far today.

Finisar remains a good GARP stock. GARP means "Growth At a Reasonable Price."

Key Statistics for Finisar Corp. (FNSR) according to Yahoo! Finance

Market Cap (intraday): 540.11M
Enterprise Value (6-Feb-08): 647.18M
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 30-Apr-09) 1: 14.58
PEG Ratio (5 yr expected): 1.81
Price/Sales (ttm): 1.20
Price/Book (mrq): 2.86

Balance Sheet
Total Cash (mrq): 106.02M
Total Cash Per Share (mrq): 0.344
Total Debt (mrq): 262.47M
Total Debt/Equity (mrq): 1.528
Current Ratio (mrq): 1.394
Book Value Per Share (mrq): 0.556
Key Statistics for JDS Uniphase Corp. (JDSU) according to Yahoo! Finance

Market Cap (intraday)5: 2.87B
Enterprise Value (6-Feb-08)3: 1.85B
Trailing P/E (ttm, intraday): N/A
Forward P/E (fye 30-Jun-09) 1: 18.44
PEG Ratio (5 yr expected): 0.78
Price/Sales (ttm): 1.55
Price/Book (mrq): 1.27

Balance Sheet
Total Cash (mrq): 1.12B
Total Cash Per Share (mrq): 5.089
Total Debt (mrq): 733.00M
Total Debt/Equity (mrq): 0.418
Current Ratio (mrq): 5.432
Book Value Per Share (mrq): 7.992

The acknowledged trouble with the sector is it needs consolidation because profit margins are low with too many suppliers chasing too few companies like Cisco. The leaders are Finisar, privately held Avago Technologies (where I used to work on fiber optics in the 1980s and early 1990's when it was part of HP before it was spun off as Agilent) and JDS Uniphase.

Jim Cramer Fans will remember he liked the stock in the $4s and $5's but gave up on it with this bearish call in May 2007 around $3. Will he get back into it before its next run or will he wait again for $4?

  • Finisar: "No. I liked FNSR ... Their time has passed. They didn't get the big orders."

I like Finisar and have added to it at these low prices. I expect to take profits as fiber comes back into fashion, especially after TV personalities like Jim Cramer start to talk about it again, but I consider it a good long-term investment for those who can stomach its high volatility.

Disclaimer. I own and recommended Finisar in "Kirk Lindstrom's Investment Newsletter" where I buy and sell it around a core position for a current "break-even" price of $1.53 after two recent purchases at lower prices. (That is, recent purchases have increased my break-even price.)

Kirk Lindstrom's Investment Letter Performance

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