Citi Reiterates Buy and $20 PT on Oclaro Following In-Line Earnings
January 28, 2011 9:42 AM
Oclaro (NASDAQ: OCLR) revenues/EPS of $120.3mln/$0.12 were generally inline w/$121.1mln/$0.12 consensus as flattish Telecom revenues offset 11% APS decline. Gross margins of 30% were +100bps q/q, solid in light of flattish rev's & toward higher end of 27%-31% guide. Following disappointing guidance coming out of Sept results, Citi views December print as a significant step in the right direction towards re-establishing credibility around execution.
Mgt guided Mar revenues $120- $123mln, bracketing $121.9mln consensus. Guidance calls for 27%-31% GM% & $6-11mln EBITDA. The first calendar year is always burdened by annual Telco price negotiations that likely tempers mgt's view, but believe mgt is taking conservative stance given recent disappointment. Citi believes Telco demand is firm and annual price concessions likely at lower end of historic 12%-15% range.
Citi recently raised OCLR estimates & target price on expectations for accelerating optical cycle & improved execution. It believes recent disappointments from Tellabs and Infinera are company specific related to product and customer exposures. In Citi's view, solid results from components suppliers OCLR & OPLK as well as solid CIEN results support continued bullish view of optical cycle in 2011.
OCLR closed Thursday at $12.65
