William Blair Suggests Buying Finisar Corporation (FNSR) Shares On the Pullback

Finisar Corporation (NASDAQ:FNSR) is falling over 20% today after underwhelming investors with its fiscal third-quarter revenue, which came in $9 million below the consensus, and EPS fell short by $0.03. In addition, fiscal fourth-quarter guidance was light by $23 million versus the consensus on revenue and $0.05 on EPS.

However, William Blair analyst Dmitry Netis remains positive on Finisar shares, reiterating an Outperform rating.

Netis commented, “While a painful outcome for Finisar, we believe the weakness is isolated strictly to the CFP firmware issue with its largest customer and slowdown in China telecom business related to the Chinese New Year, albeit not unexpected, given push-outs of new tender awards to mid-summer, and is not a reflection on overall demand in the optical component industry. We believe fourth-quarter guidance could be conservative should firmware issue get resolved sooner. Furthermore, we expect growth in fiscal 2018 to be driven by continued demand for 100G QSFP28, CFP2-ACO, ROADM business in China and North America, and a meaningful ramp-up of VCSEL lasers for 3-D sensing applications starting in the second half of this calendar year.”

“Given supply shortages and solid visibility into demand sans CFP firmware issue (management noted could continue through calendar 2017), we like the setup moving toward fiscal 2018 […] We are buyers on the pullback given an attractive risk/reward profile,” the analyst concluded.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Dmitry Netis has a yearly average return of 8% and a 56% success rate. Netis has an 19.7% average return when recommending FNSR, and is ranked #441 out of 4515 analysts.

Out of the 12 analysts polled in the past 12 months, 10 rate Finisar stock a Buy, while 2 rate the stock a Hold. With a return potential of 32%, the stock’s consensus target price stands at $36.80.


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