Too Many Opportunities In Finisar To Ignore; Raymond James Upgrades To Strong Buy

Raymond James upgraded Finisar Corporation FNSR to Strong Buy from Outperform following the recent 23 percent selloff.

“We are not blind to Finisar’s execution missteps; however, we believe issues are either misunderstood or exaggerated. We see upside to estimates from several sources including resolution of issues with a top customer, 100G data center, and 3D sensing,” analyst Simon Leopold wrote in a note.

Optimistic On CFP Resolution

The company acknowledged problems with its 100G transceiver CFP, while sales miss and weak outlook were attributed to issues working with a platform from historic 10 percent-customer Huawei.

Though Leopold isn't assuming a quick resolution and envision share loss as a risk, the analyst sees resolution aiding a better than seasonal recovery in one or two quarters.

“We also envision growth from CFP2-ACOs into the Verizon initiative,” Leopold noted.

3D Opportunity

The analyst said Cisco and web scale customers will buy more QSFP28’s (100G data center). Leopold is also optimistic on 3D Opportunity despite Lumentum is better positioned to take share.

“We believe Lumentum gains capacity advantages by working with a foundry partner, but with its Allen, Texas, fab, Finisar could generate $10’s of millions and by our estimate $0.10-0.35 of incremental EPS in FY18,” Leopold added.

At last check, shares of Finisar were down 0.52 percent to $26.84. The analyst has a $40 target price.

See Also:

Tech Earnings Expectations: Adobe Vs. Oracle

Stocks To Watch For March 13, 2017