Can you feel the ground moving beneath your feet? Shares of Finisar Corporation (NASDAQ:FNSR) skyrocketed nearly 25% today, after tech giant Apple Inc. (NASDAQ:AAPL) announced it will invest $390 million to enable Finisar to increase its R&D spending and high-volume production of vertical-cavity surface-emitting laser (VCSEL) arrays used to power Apple’s 3-D sensing applications. All those who sold out of the position before this news broke are probably kicking themselves right about now.
Raymond James analyst Simon Leopold commented, “We view the investment as a large endorsement for Finisar, given Apple’s importance as the largest current adopter of 3D sensing technology in mobile applications. The investment also removes uncertainty regarding the company’s ability to finance these projects, which could have potentially thwarted Finisar’s plans to participate as a material supplier to Apple. We anticipate Finisar will employ the bulk of the funds to increase R&D allocations and equipment purchases needed to bring the Sherman facility into production mode, which the company estimates could commence shipments as soon as C2H18. We believe that the new assets will allow Finisar to meaningfully increase capacity from the $30 million a quarter ceiling today (Allen facility operating 4-inch wafers) to $100+ million a quarter once the new fab capacity is ramped and yields are optimal. It will take a number of quarters to reach this production level.”
“Despite the positive news to Finisar, our estimates remain unchanged. Although we see meaningful upside to our current expectations on the potential contributions of 3D sensing to Finisar’s revenues, we remain conservative on our expectations given potential execution risks,” the analyst added.
More on Apple’s deal with Finisar: Finisar’s Collaboration with Apple on VCSEL Arrays Is a ‘Strong Positive’: William Blair