Finisar Investors Not Buying Rare Optical Sector View
By JOHNATHAN BURNS
Of DOW JONES NEWSWIRES
NEW YORK -- There are seemingly no heroes in the bearish telecommunications equipment market, and all the stories are regarded with wilting cynicism.
Such was the case Thursday with optical subsystems maker Finisar Corp. (FNSR), recently pounded down 12% in furious trading and continuing an unenviable month-long skid that has left shares down 50%.
All this on the heels of a remarkable feat within the industry: the company gave guidance for sequential improvement in sales for the ongoing quarter and a one-year revenue forecast that exceeded the previous average of Wall Street estimates.
" I think this is an overreaction due to fears," about the company's target markets, said SoundView Technology Group analyst Kevin Slocum. "I love the stock. I would back up the truck here."
In the company's fiscal third quarter reported Wednesday after market close, Finisar reported a loss of $53.8 million, or 29 cents a share, on revenue of $35.8 million. Excluding acquisition costs, a $32.8 million charge for amortization of goodwill and purchased intangibles and numerous other items, the company posted a pro forma loss of $9.9 million, or 5 cents a share.
The company's sales and per-share loss results met Wall Street's estimates, according to a Thomson Financial/First Call survey of analysts.
The company said fourth quarter sales will be up about 6% to 12% with earnings roughly flat as a result of the recent acquisition of AIFOtec. The sales targets, which come out to between $38 million and $40 million, are slightly below previous analysts' estimates of $41 million - which might explain part of Thursday's selloff.
But Slocum noted the company also said fiscal 2003 sales will be between $220 million and $240 million versus a consensus of $213 million prior to the report.
That, however, was below Slocum's previous fiscal 2003 revenue estimate of $300 million. He lowered his numbers to the high end of guidance Thursday, maintaining a strong buy rating while admitting that such a move likely added to Thursday's downward momentum.
"At the end of fiscal 2003, we wouldn't be at all surprised if Finisar printed a revenue number close to our prior $300 million estimate," Slocum said. "This is going to be a company that is going to be explosive off the bottom. There's a quarter out there when these guys are just going to dust the numbers. I think it's going to be one of the best communications stocks out there in the next five years."
Finisar's projections for growing revenue year-over-year within the next 12 months stand out strikingly in an industry where most big-name players only issue financial views for the current quarter. Heavyweight component maker JDS Uniphase Corp. (JDSU), for instance, has said it believes it has reached a bottom in sales, but its revenue numbers may bounce around in the near future.
Optical systems maker Ciena Corp. (CIEN) also recently lowered its sales projections as customers have delayed or cut spending plans.
CIBC World Markets analyst Jim Jungjohann reiterated his buy rating on Finisar shares, saying he likes the company's storage and enterprise exposure "where order rates are improving, relative to traditional telecom component companies."
He did note the company's valuation appears expensive on a relative basis, with the shares trading Wednesday at 7.2 times sales versus the group average of six times.
"But, again, no other company is showing the aggressive growth potential like Finisar," he said.
After dropping more than 15% in earlier trading, shares of Finisar were recently down 11.6%, or 87 cents, to $6.62 with volume near 5 million compared to the daily average of 3.7 million.
-By Johnathan Burns,Dow Jones Newswires, 201-938-2020
johnathan.burns@dowjones.com
Updated February 28, 2002 1:00 p.m. EST |
