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Tuesday, September 07, 2010

FNSR: Analyst Summary for Finisar

Finisar Corporation (NASDAQ: FNSR Charts), a global technology leader for subsystems and components for fiber optics communications, reported record results on Sept. 2. Jerry Rawls, Finisar's executive Chairman of the Board said "We achieved company records for revenues, gross margin, operating margin and EPS. Furthermore, the demand environment continued to be very strong for us, particularly for our higher data rate transceivers and our ROADM products. As a sign of that ongoing strength, our book-to-bill ratio in the quarter continued to be above 1.0."

I've been a big fan of Finisar for some time. (See my March 3, 2009 BUY ALERT under "Figures.") I have made a lot of money from the stock and continue to hold shares as I trade its volatility around my core position for added return.  I recently added shares back to my explore portfolio at $12.50 that I sold earlier at $15.88.

FNSR - Finisar Corporation
  Intraday Chart  10-Year Chart  

This is some of what I wrote about Finisar in my recently published September issue of "Kirk Lindstrom's Investment Letter."
8/18/10 Update: "Conservative growth estimates from Cisco, a big FNSR customer, caused the stock price to correct to the point I am tempted to buy shares I sold at $15.88 to take profits. I have not bought yet because the market overall is technically bearish with many failed support levels, including Finisar not holding the dashed green line. Thus, I am waiting for a fat pitch at the auto buy level of $12.50 which is 54¢ below the current 200-DMA at $13.04. Overall, I remain very bullish for Finisar with a 5.0% explore portfolio weighting at $14.04."
and
8/18/10 continued:  Unlike stocks tied more directly to the economy such as GE and FedEx, FNSR will grow even if economic growth slows to a trickle. All those iPads, iPods, and Android phones people are buying as fast as they are made will have users wanting more bandwidth to see videos, surf the web and have video chats. People now seem to be splurging on these new, cool “toys” while they put off buying new refrigerators, autos and other big-ticket items until they are sure they will keep their jobs. Especially when compared to its history, Finisar is remarkably “cheap” with a 0.9 PEG for current fiscal year earnings estimates.
It was worth the wait.  On 8/24 I sent an email "FNSR Auto Buy Alert" to my subscribers
Hello Subscribers , I just bought 125 shares of FNSR at $12.50 for the explore portfolio according to the "Auto Buy and Sell Table" on page 31 of the September newsletter I emailed yesterday.

For some reason, my buy order in my IRA did not fill.  Maybe enough of you had orders in front of mine and they ran out of shares at $12.50.  The real goal is to add here below the 200-DMA (currently $13.16) after a 43% decline from the recent peak.  Thus, I changed my personal order and bought 150 shares for my IRA at $12.80 rather than bother worrying about $45 left on the table.  I remember paying about $50 in commission to buy stocks back in the 1990s! 
One skilled subscriber wrote me on August 26 he bought within 2¢ of the ultimate bottom:
"Picked up 100 FNSR yesterday at $12.00 even plus $7.95 with Fidelity.."
Chart shows FNSR bottomed at $11.98, 52¢ below where I bought back my profit taking shares.  Note how it traded briefly below its 200 day moving average before returning to the dashed green support/resistance line.

Lets see what other analysts have to say about Finisar.

StreetInsider.com reports:
Citi maintains a 'Hold' on Finisar Corp, raises PT from $17.50 to $19.  Citi analyst says, "Results and guidance underscore our view that telecom cap ex recovery intact and optical spend on the mend as telecom component revenue increased +28% q/q & ROADMs grew +13% (units +25%), more than offsetting 5% LAN/SAN sequential decline. Mgt stated that 2Q LAN/SAN likely flat, implying +6% - +14% growth in Telecom/ROADM."
American Banking News reports:
Credit Suisse boosted its price target on shares of Finisar  from $16.00 to $20.00 after strong first quarter results in a research note to investors on Friday. The analysts said that the company’s strong earnings indicates an ongoing rebound in demand. The analysts also maintained a “neutral” rating in a research note to investors on Friday.
 Benzinga reports:
Jefferies Maintains Hold Rating On Finisar After Earnings.
The Jefferies analysts wrote, "Finisar is expanding capacity as demand for ROADM and 10G continues to surprise to the upside. However, we remain cautious due to the potential for inventory build by Finisar's customers in response to higher lead times. Maintain Hold and $16 PT."
Wall St. Cheat Sheet reports:
In a nutshell, the borderline absurd increase in data traffic over traditional telecomm networks brought on by the advent of smartphones, etc., has stressed these networks to the point that they can no longer operate efficiently.  The obvious example of this would be the manner by which the iPhone has single-handedly made AT&T into a “terrible” wireless carrier.  In reality, it’s not so much that AT&T has a sub-par network as much as it is that those networks were built to accommodate telephone calls, not 15-minute youtube videos of your friends dog eating a sandwich.
This is the predicament referred to as “wireless backhaul.”  We send a little bit of data to the network, i.e., dogeatssandwich.com, but the network must send back (thus “backhaul”) an exponentially greater amount of data, i.e., the 15-minute video.  The solution to this problem involves rehashing much of the existing network, and happens to be one of the few true high-growth domestic themes in existence.  All of the companies involved stand to benefit greatly, and FNSR may be at the forefront.

...  Nonetheless, FNSR is one of the higher-visibility growers out there, and would definitely make a solid pick for any portfolio.  Look for shares to test July highs at around $18 if the market can keep from falling too much.

This is part of what I am preparing for the next issue of  "Kirk Lindstrom's Investment Letter."
I believe Finisar is the best company in the fiber optics business and its products will be critical for the transmitting data long and short distances. Server farms will switch to optical links to move data between servers to save on energy compared to using wires; less energy means lower cooling costs too.
...On Sept 2 FNSR announced revenues grew 10.3% and 61.5% over Q4-2010 and Q1-2010 to a record of $207.9M. Net income (GAAP) was $19.4M or 19.1¢ per share and 11.4% of revenue.
...For Q2, FNSR expects revenue of $215M to $230M with net margin growing to 11.5% of revenue. 
OK everyone, get back to sending friends and family Labor Day videos with your cell phones.


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