Optical components manufacturer Finisar (NASDAQ:FNSR)
has become a miserably bad call for me. Six months ago, I wrote that I
would never want to hold Finisar for the long term and that I thought
the shares were already trading at their inherent DCF-based value (with
some bullish assumptions). I also thought, though, that momentum in the datacom business would support the business
in the near term and lend strength to the shares. With the stock down
more than 20% over the past six months, though, that clearly has not
happened.
Along with fellow component manufacturer JDS Uniphase (NASDAQ:JDSU) and telecom equipment companies like Alcatel Lucent (NYSE:ALU) and Ciena (NYSE:CIEN),
Finisar is contending with weaker than expected telecom carrier
spending. Finisar is also seeing lumpier datacom spending from Web 2.0
customers and weakening growth in wireless transceivers while pursuing
lower-margin sales into the Chinese telecom market.
I didn't see a
lot of intrinsic value in the shares six months ago, and I don't see
much now either given the company's lower guidance. I can also construct
a bearish scenario that would see the company retest the $11-$13 range.
Finisar is part of a volatile sector and is heavily shorted, though,
and the shares could bounce if business conditions improve and the
company delivers beat-and-raise quarters. I do think that Finisar has
good technology in 40G/100G transceivers and transponders, as well as
opportunities with its wavelength selective switches and ROADM cards,
but this is a pretty tough sector for value-oriented buy-and-hold
investors like me.
Continue reading here:
Finisar Taking Its Lumps
No comments:
Post a Comment