Bull of the Day: Finisar
by Brian Bolan Published on November 06, 2013
Summary of Key Points:
(Added charts are mine)
Lower CapEx Guidance from Ma Bell
Nearly the entire fiber optic industry had a dimmer switched lowered on their stock prices on October 24. AT&T reported earnings and after increasing CapEx spending in the 3rd quarter, analysts questioned if that rate would continue.
but the CapEx spending cut was only 5%
A simple search of the AT&T conference call transcript reveals the truth of what was said versus how it was interpreted. The CFO stated "we are not trying to limit CapEx spending by a standard compared to last year."
He went on to say "I think we said in the past that we would expect the CapEx for this year to be in $21 billion range and for '14 and '15 to be in the $20 billion range and at this time we are not adjusting that or changing that." So while CapEx may be shrinking, it’s not as much as you may have believed. It’s also not so likely that this means a 5% cut across the board and fiber could even see an increase in CapEx.and on Valuation he says:
The valuation of FNSR looks very attractive. While the trailing PE is well ahead of the industry average, the forward PE of 21x is right in line with it. More conservative measures like the price to book multiple and the price to sales multiple each show FNSR trading at a multiple that is less than half the industry average. As analysts continue to move estimates higher, the valuation will only become more attractive unless the stock vaults well above the recent 52 week high.
Disclosure: I own Finisar with a very low cost basis and cover it in my newsletter.
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