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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