UPDATE: Citigroup Raises Target to $6 on Oclaro

Citigroup reiterates its Buy/High Risk rating on Oclaro OCLR and raises its price target by half a dollar to $7 a share as the company appears to be over its worst challenges. Citigroup says, "Challenges certainly remain, but we believe OCLR is past the worst: cash balances have stabilized and are likely to show improvement over time from mix of insurance proceeds, asset sale, longer-term working capital management, and a slow turn in fundamentals, with accelerated improvement in 2H1CY12. Acknowledging disappointing results/guidance on gross margins, we maintain our Buy/High Risk rating on view that OCLR's inherent margin leverage is intact, and company should see dramatic gross margin improvement in back half of this year on overall healthy optical demand & new products." OCLR closed at $4.56 a share on Thursday.