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Wednesday, March 03, 2010

FNSR: Finisar up 571% Over Past Year

A year ago today I added to my Finisar (Ticker FNSR Chart and Quote) holdings at 24¢ (This is $1.92 at today's split adjusted price)

See PDF file: Finisar Mar 3 Buy Alert at 24¢

Today Finisar is $12.89!! (or $1.61 at the pre-split price)

The Gain is (12.89-$1.92)/$1.92x100% = 571%!

What were you doing a year ago? Buying or selling?

Going forward, I still like Finisar and hold it in both new personal and newsletter explore portfolios.

Excerpts from the March issue of "Kirk Lindstrom's Investment Letter" about Finisar:

On Feb 9 Finisar said it expects to report revenues of $166 to $167M for its fiscal Q3 ended January 31, 2010. Its prior revenue guidance was $148 to $158M. In the absence of a material adjustment, Q3 revenues will set a new record for Finisar surpassing the previous combined sales for Finisar and Optium of approximately $163M for the fiscal quarter ended July 31, 2008, just prior to the merger of the two companies and the market melt-down. Based on these projections, Finisar expects to be at the upper end of its original guidance for Q3 on a non-GAAP basis of 30%-32% for gross margin and 6%-8% for operating margin. Sequential revenues will be up about 14.3% over Q2-2010 and 32.1% over last year, Q3-2009! This is the great performance I expected and expect to continue. It is why I bought so many shares of Finisar during the downturn.

6%-8% operating margin on $166 to $167M revenue implies earnings between $10.0M and $13.4M or 15¢ to 21¢ per share.

Finisar should continue to grow operating margin as the costs from merging with Optium end and the new efficiencies take hold. Margins will also improve with volume which I predict will continue to grow at a high rate for many years, subject to gyrations of the economic cycle.

I think FNSR could easily do $1.00 per share in 2011 where a PE of 20 for their growth would be very reasonable. Add in some exuberance as others jump on the bandwidth-wagon and a PE of 40 would be a good target to take major profits at. I find it amazing that FNSR is still cheap with a PE of only 13.5 on FY 2011 earnings. FY2011, only months away, is when we will get FY2012 earnings estimates that should be significantly higher. I expect we will see $20 in a year, if not sooner.

Click table to see full size image

My only regret is I didn't buy even more!

I actually bought Finisar shares 6 different times at prices lower than today.

After buying when very low, I took some profits when it soared. Then I bought some back on a correction. Now I and am back to taking profits, a little at a time, as I hope it continues higher.

If Finisar corrects enough, I may buy shares back again unless my opinion on Finisar changes and I sell all shares.

Disclaimer: I own FNSR in my personal and newsletter portfolios. I may trade around a very profitable core position at any time. I often have buy and sell targets in my newsletter where I announce "Auto Buys" and "Auto Sells" (limit orders with your broker) ahead of time.

Note: A day later I bought some GE at $6.76. See
Give it time to load as it is pdf on a slow server.

Click for full size image courtesy of stockcharts.com

Current FNSR Chart and Quote


2 comments:

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  2. Yesterday after the market closed, Finisar announced better than expected earnings and they increased their guidance.

    From SeekingAlpha:

    Earnings: Wednesday After Close

    * Finisar (FNSR): 3Q2010 EPS of $0.17 beats by $0.01. Revenue of $167M vs. $165M. Guides Q4 revenue above consensus. Shares -2.6% AH.

    From Finisar Earnings Press Release:

    COMMENTARY

    "This marks our third consecutive quarter of growth in revenues at double digit rates," said Jerry Rawls, Finisar's executive Chairman of the Board. "This is a result of a winning product portfolio and strong customer support as we worked to meet a surge in product demand. A robust order trend and healthy backlog have continued into our fourth fiscal quarter which should enable us to make a strong finish to this fiscal year."

    "I am delighted with our progress in manufacturing operations and the improvements we were able to achieve in manufacturing yields," said Eitan Gertel, Finisar's Chief Executive Officer. "Our ongoing efforts to reduce product costs and transition production to our off-shore locations during the fourth fiscal quarter should position us well for realizing our previous target of 10% operating margin on a non-GAAP basis in the near future."

    OUTLOOK

    The Company indicated that it currently expects that revenues for its fourth fiscal quarter ending April 30, 2010 will likely range from $175 to $185 million. On a GAAP basis, gross margin is expected to be approximately the same as the third quarter with operating margin in the range of 4.5% to 6%. Additional non-cash and infrequently occurring charges excluded in calculating non-GAAP operating income are expected to total approximately $6 to $8 million. As a result, on a non-GAAP basis, gross margin is also expected to be approximately the same as the third quarter with non-GAAP operating margin in the range of 8.5% to 10%.

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