Editor's Note

If you want a fast network, it has to be optical. Morgan Stanley, FBR, Stifel and DA Davidson all agree on this company.


New positions are only added on Wednesday and Saturday except in special circumstances.


FNSR - Finisar - Company Description

Finisar Corporation provides optical subsystems and components for data communication and telecommunication applications in the United States, China, Malaysia, and internationally. The company's optical subsystems primarily include transmitters, receivers, transceivers, transponders, and active optical cables, which provide the fundamental optical-electrical, or optoelectronic interface for interconnecting the electronic equipment used in networks comprising switches, routers, and servers used in wireline networks, as well as antennas and base stations used in wireless networks. It also offers wavelength selective switches that are used to switch network traffic from one optical fiber to various other fibers without converting to an electronic signal. In addition, the company provides optical components primarily consisting of packaged lasers and photodetectors; and passive optical components for use in telecommunication applications. It markets its products through direct sales force, as well as distributors, manufacturers' representatives and resellers, and system integrators; and to the manufacturers of storage systems, networking equipment, and telecommunication equipment, as well as to their contract manufacturers. Finisar Corporation was founded in 1987 and is headquartered in Sunnyvale, California. Company description from FinViz.com.

Finisar shares were crushed for for a 35% decline in March after the company reported earnings of 20 cent when analysts were expecting 24 cents. Revenue declined -13% to $332 million and missed estimates for $334 million. For the current quarter they guided to earnings of 12 cents and analysts were expecting 23 cents. Revenue guidance of $310 million was also below estimates for $334 million.

Shares collapsed from $20 to $14 on the news. Within a couple days multiple analysts reiterated their buy ratings. Morgan Stanley upgraded the company from hold to buy. Stifel Nicolaus, DA Davidson and Riley FBR, all reiterated buy ratings saying the company was oversold and business was too good to ignore because of product mix in one quarter.

Shares rebounded on the Morgan Stanley upgrade on April 5th and have been slowly regaining ground.

Earnings are June 7th so we have have a long time for the stock to recover before that event. If th etech sector is going to rally into earnings, Finisar should benefit.

Buy FNSR shares, currently $16.29, initial stop loss $15.10.
Alternate position: Buy June $17 call, currently $1.00. Initial stop loss $14.75.


No New Bearish Plays