Sunday, February 7, 2016

Seeking Alpha: Finisar At Risk Of Profitless Prosperity

I've written in the past that Finisar (NASDAQ:FNSR) is best looked at as a fleeting engagement for active investors, and the last nine months underline why - the shares have lost about 40% of their value as the company has underwhelmed on revenue growth and found no traction with margins. To that end, revenue estimates for FY2016 are now about 6% to 10% lower than they were back in May and earnings estimates have fallen even farther.

The basic bullish driver for Finisar, increasing data traffic growth and increasing demand for 40G (and, eventually, 100G) equipment in the data center, is still valid but the current environment is challenging. Finisar doesn't have a good record of generating meaningful economic profits and the optical sector badly needs consolidation. What's more, the adoption of silicon photonics remains a significant long-term risk. These shares could still see the low-to-mid $20s on a renewed wave of bullishness on the data center upgrade opportunity, but that valuation is predicated in part on the market once again forgetting that this is a cyclical business with a bad record of full-cycle profitability.

Continue here:
Finisar At Risk Of Profitless Prosperity

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