Rosenblatt Expects NeoPhotonics To Announce Bullish Guidance For March Quarter

NeoPhotonics Corp NPTN is scheduled to report its fourth-quarter results after the market close Thursday.

The company is likely to announce top-line guidance for the March quarter that's marginally better than consensus expectations, according to Rosenblatt Securities.

The Analyst

Analyst Jun Zhang maintained a Buy rating on NeoPhotonics with an unchanged $13 price target.

The Thesis

Driven by demand strength from Huawei and Ciena Corporation CIEN, NeoPhotonics may announce March quarter topline guidance above the consensus estimate of $79.7 million, Zhang said in a Wednesday note.

The consensus estimate for NeoPhotonics' first-quarter EPS is a 7-cent loss, which appears overly conservative, the analyst said. 

The EML laser business seems poised to benefit from 5G front haul deployments, although this may only boost performance in the back half of 2019, Zhang said. 

NeoPhotonics’ gross margin could expand over the next few quarters, driven by the company’s divestment of the 100G client-side CFP2 module business, the analyst said. The 400G coherence module could have better gross margins and sell for more than $1,000, he said.

Better utilization at the Japanese laser fab and increased business from tunable lasers may also boost NeoPhotonics’ gross margin, Zhang said. 

Rosenblatt expects the company’s overall Chinese business to grow by 10 percent year-on-year in the March quarter.

Price Action

NeoPhotonics shares were up slightly at $8 at the time of publication Wednesday. 

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