UPDATE: Goldman Sachs Raises PT on Finisar as Guidance Beat Expectations
In a report published on Thursday, Goldman Sachs analyst Kent Schofield raised the price target on Finisar (NASDAQ: FNSR) from $16.00 to $17.00 and maintained a Neutral rating.
In the report, Goldman Sachs stated, "In F4Q, Datacom strength easily outpaced ongoing Telecom weakness. Datacom strength is being driven by 10G (about 40% of Datacom) and 100G, especially as 10/100G datacenter products have increasing optical content (over copper). Finisar expects Datacom strength to continue, which is the primary driver for F1Q guidance ahead of expectations and we believe the primary driver of its 10%-15% yoy revenue growth guidance in FY14 versus consensus' prior 12%. Cisco's internally developed CPAK will continue to be a Datacom risk, but Cisco will still have to buy lasers and receivers from vendors such as Finisar and be able to meet its own large volume needs. Finisar also expects Telecom to “modestly” improve in F1Q and strengthen through FY14 as recently launched products (e.g. WSS FlexGrid and tunable XFPs) increase share at new and existing customers. We believe Finisar's expectation for only “modest” F1Q growth off of an easy comp is reasonable given our estimate that (1) overall North American carrier capex spending will grow below seasonal (+8% versus +12%) and (2) our belief that Finisar's potential customer concentration will continue to weigh on Telecom results. We are raising our FY14 EPS estimate to $1.06 from $0.99 on higher revenues, lowering our FY15 EPS to $1.25 from $1.31 on lower gross margins, and introducing our FY16 estimate of $1.42."
Finisar closed Wednesday at $14.52.
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