Stock Update (NASDAQ:FNSR): Finisar Corporation Shares On The Rise Amid Record Revenues For Fiscal First Quarter


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Finisar Corporation (NASDAQ:FNSR), a global technology leader for subsystems and components for fiber optic communications, announced financial results for its first quarter of fiscal year 2017, ended July 31, 2016.

“I am pleased to announce that Finisar achieved record revenues for our first quarter of $341.3 million, an increase of $22.5 million, or 7.1% compared to the prior quarter. This growth was primarily driven by strong demand for 100Gb/s transceivers in CFP, CFP2, CFP4, and QSFP28 form factors. In addition, demand for wavelength selective switches was strong. Our gross margins improved significantly due to favorable product mix and leverage of our vertically integrated manufacturing infrastructure over the larger volume. The combination of revenues being at the higher end of our guidance range and better than expected gross margins resulted in earnings per fully diluted share exceeding the upper end of our guidance range,” said Jerry Rawls, Finisar’s Chief Executive Officer.

Financial Statement Highlights for the First Quarter of Fiscal 2017:

  • Revenues were $341.3 million, an increase of $22.5 million, or 7.1%, from $318.8 million in the preceding quarter.
  • Sales of telecom products increased by $22.0 million, or 29.0%, compared to the preceding quarter. This increase was due to higher sales of wavelength selective switches, coherent receivers, and 100G transceivers, as well as a rebound in demand for other telecom products including amplifiers and 10G transceivers, both tunable and fixed wavelength.
  • Sales of datacom products increased by $0.5 million, or 0.2%, compared to the preceding quarter, primarily driven by growth in demand for 100G transceivers including CFP, CFP2, CFP4, and QSFP28 form factors, partially offset by a decline in sales of transceivers for wireless applications and 40G transceivers. Datacom revenue, excluding transceivers for wireless applications, increased 3.1% over the preceding quarter. Sales of 100G transceivers for datacom applications increased 21.8% over the preceeding quarter, and 115.8% over the first quarter of the prior fiscal year.
  • GAAP gross margin improved to 31.7%, compared to 28.4% in the preceding quarter, primarily due to favorable product mix and the benefit of vertical integration over the larger volume.
  • Non-GAAP gross margin improved to 33.1% compared to 30.6% in the preceding quarter.
  • GAAP operating expenses were $79.9 million compared to $76.3 million in the preceding quarter. The increase was due to higher payroll taxes from the annual vesting of employee restricted stock unit grants, higher legal expenses from two patent trials completed in the quarter, and higher employee compensation levels. GAAP operating expenses as a percentage of revenue decreased to approximately 23.4% of revenue compared to 23.9% in the preceding quarter.
  • Non-GAAP operating expenses increased to $69.3 million compared to $66.2 million in the preceding quarter. Non-GAAP operating expenses as a percentage of revenue decreased to approximately 20.3% of revenue compared to 20.8% in the preceding quarter.
  • GAAP operating margin improved to 8.3% from 4.4% in the preceding quarter.
  • Non-GAAP operating margin improved to 12.8% from 9.8% in the preceding quarter.
  • GAAP earnings per fully diluted share was $0.22 compared to $0.12 in the preceding quarter, primarily due to higher revenues levels and improved gross margins.
  • Non-GAAP earnings per fully diluted share was $0.38 compared to $0.29 in the preceding quarter.
  • Cash, cash equivalents and short term investments increased $31.3 million to $593.8 million at the end of the first quarter, compared to $562.5 million at the end of the preceding quarter.

OUTLOOK

Finisar indicated that for the second quarter of fiscal 2017 it currently expects revenues in the range of $355 to $375 million, non-GAAP gross margin of approximately 34%, non-GAAP operating margin of approximately 14.3% to 15.3%, and non-GAAP earnings per fully diluted share in the range of approximately $0.44 to $0.50.

Shares of Finisar¬†are up nearly 13% to $26.15 in after-hours trading Thursday. FNSR has a 1-year high of $23.65 and a 1-year low of $10.66. The stock’s 50-day moving average is $19.99 and its 200-day moving average is $17.68.

On the ratings front, Finisar has been the subject of a number of recent research reports. In a report issued on September 6, Stifel analyst Patrick Newton upgraded FNSR to Buy, with a price target of $28, which implies an upside of 20.5% from current levels. Separately, on the same day, Needham’s Alex Henderson reiterated a Buy rating on the stock and also has a price target of $28.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Patrick Newton and Alex Henderson have a total average return of 14.0% and 10.1% respectively. Newton has a success rate of 58% and is ranked #398 out of 4147 analysts, while Henderson has a success rate of 54% and is ranked #225.

Overall, 3 research analysts have assigned a Hold rating and 4 research analysts have given a Buy rating to the stock. When considering if perhaps the stock is under or overvalued, the average price target is $23.67 which is 1.9% above where the stock closed yesterday.

Finisar Corp. provides optical subsystems and components that are used in data communication and telecommunication applications. Its optical subsystems consist primarily of transmitters, receivers, transceivers, transponders and active optical cables that provide the fundamental optical-electrical, or optoelectronic, interface for interconnecting the electronic equipment used in building these networks, including the switches, routers and servers used in wire line networks as well as the antennas and base stations for wireless networks.