5 Reasons Finisar Is An Analyst's Top Pick For 2018

2017 was a challenging year for Finisar Corporation FNSR, with the stock losing more than 30 percent. But some on Wall Street are optimistic the coming year will be a profitable one for shareholders of the optical communications company. 

The Analyst

Northland Capital Markets' Tim Savageaux maintains an Outperform rating on Finisar's stock with an unchanged $33 price target. The analyst named Finisar as its top pick in the Comm Tech sector for 2018.

The Thesis

The case for owning Finisar's stock in 2018 is five-fold, Savageaux said in a research report. (See the analyst's track record here.) They are, according to Northland Capital Markets:

• A major opportunity ahead in the 3-D sensing space, which could contribute an incremental $10 to $15 per share.
• Continued 100G Cloud datacom growth.
• New product ramps in 100G/Metro Telecom.
• The potential for sector consolidation.
• A recovery in China after serving as a "main source of pressure" throughout 2017.

Given the multiple catalysts ahead, Finisar's stock could be seen as attractive after a notable pullback from the $20 level, Savageaux said. Finisar's quarterly revenue capacity of $30 million is expected to ramp to over $100 million by the end of next year and is accompanied by "attractive" margins, he said. 

"We believe FNSR is well-positioned to manage pricing, volume and cost dynamics given its industry-leading scale and manufacturing capacity." 

Price Action

Shares of Finisar were trading lower by around 0.6 percent midday Friday. 

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