In a research report released on Wednesday, Rosenblatt analyst Jun Zhang initiated coverage on shares of Oclaro, Inc. (NASDAQ:OCLR), with a Buy rating and price target of $12, which implies an upside of 43% from current levels.

Zhang wrote, “We believe the worst is behind the optical group. We believe that China Mobile’s Phase 12 60T procurement and China Telecom’s Metro upgrade are likely to begin in June and September/October, respectively, which should help reignite industry demand and push OCLR back to its normal revenue levels in CQ4 this year. We believe China’s optical demand can resume its growth in 2018 with more metro level upgrades.”

“We expect pricing pressure from Huawei and ZTE for calendar 2H17 on older optical modules, but as the product mix shifts toward newer product, we think OCLR will maintain its gross margin in the 39-40% level in calendar 2H17,” the analyst added.

From the analyst’s perspective, both the ACO and QSFP28 products will remain in short supply, but availability should improve over the next several quarters with Datacom and cloud remaining strong through the next two years.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jun Zhang has a yearly average return of -7.7% and a 50.0% success rate. Zhang is ranked #4011 out of 4566 analysts.

Overall, the 7 analysts polled by TipRanks (in the past 3 months) rate Oclaro stock a Buy. With a return potential of nearly 50%, the stock’s consensus target price stands at $12.60.