Finisar beats Q4 estimates, issues strong Q1 outlook
Last week, Fiber optic technology company Finisar Corp. (FNSR) reported its fiscal 2016 fourth-quarter earnings and revenue that comfortably exceeded the estimate of analysts.
The reported 16% gain in the earnings per share, on a y-o- y basis, was the highest in the past two years.
Naturally, the results drew the attention of the traders and analysts instantaneously, thereby taking the share price to $18.83 on Monday’s close.
For the reasons explained below, we are bullish on the manufacturer of components for fiber optic communications.
The company recorded fiscal 2016 fourth-quarter revenue of $318.79 million, down from $320.04 million in the corresponding period of fiscal 2015. The reported revenue was higher than the analysts’ estimate of $317.38 million.
During the fourth-quarter, Finisar’s net income almost doubled to $13.07 million or $0.12 per share, from $7.32 million or $0.07 per share in the year-ago corresponding quarter. The fourth-quarter non-GAAP net income increased to $31.82 million or $0.29 per share, from $26.87 million or $0.25 per share in the fourth-quarter of fiscal 2015. The consensus estimate of the Street was earnings of $0.25 per share.
Finisar Corporation
During the fourth-quarter, the non-GAAP operating expenses declined to $66.2 million, from $68.2 million in the similar period of fiscal 2015. On the other hand, the non-GAAP margin increased to 30.6%, from 30.3% in the prior quarter. As of May 1, 2016, the cash and cash equivalents increased to $562.5 million, up $72.1 million from $490.1 million in the quarter ended May 3, 2015.
Segment wise, the data applications revenue registered a sequential growth of 10.8%. The growth was mainly driven by the demand for 40G and 100G transceivers. The telecom applications revenue declined by $14.1 million (or 15.6%) compared to the prior quarter. Telecom price negotiations and decline in the demand for legacy products contributed to the decline.
For the fiscal 2017 first-quarter, Finisar anticipates earnings in the range of $0.27 to $0.33 on revenue between $323 million and $343 million. The Wall Street estimates for the fiscal 2017 first-quarter is earnings of $0.27 per share on revenue of $327.2 million. The stock has a firm support at 17.20. The main line has crossed above the signal line. Furthermore, the main line has made a bullish crossover above the zero line. Thus, we can expect the uptrend to continue till the next major resistance at 21.20.
A binary trader should use the opportunity to enter a long trade in the current scenario. The target level for the long trade should be $21 or lower. To increase the probability of success, an expiry date in the third week of July should be chosen.
