Finisar Leaps on Upgrade
The news pushed Finisar’s stock up 13.27 percent to $14 in midday trading on the Nasdaq. A recent insider spending spree at Finisar also signals an upturn in the component manufacturer's fortunes (see Finisar).
Specifically CSFB believes the company’s storage subsystem business is set to perform well this year. The EMC Corp. (NYSE: EMC)/Dell Computer Corp. (Nasdaq: DELL) reseller agreement (see Dell and EMC Do a Deal); McData Corp.'s (Nasdaq: MCDT) continued traction with its low-end switches; and Emulex Corp.’s (Nasdaq: EMLX) share gains at Sun Microsystems Inc. (Nasdaq: SUNW) and Dell are all likely to create increased visibility for Finisar, CSFB analysts said in a note to investors.
The move to 2-Gbit/s Fibre Channel in 2002 should boost Finisar’s transceiver sales, the firm believes. Plus, as SAN sizes grow, larger switches with higher port counts are required, increasing the need for more transceivers. In addition, many storage arrays are now embedding switches, meaning more Fibre Channel ports on the storage boxes themselves.
While Gigabit Ethernet demand will remain stable, according to CSFB, the firm expects Finisar to see “increased transaction with Cisco Systems Inc. [Nasdaq: CSCO], for metro CWDM and 10-Gbit/s transponder products,” says CSFB analyst, Max Schuetz.
Finisar reported a drop of 21 percent year-to-year in second-quarter revenues for fiscal year 2002 -- from $44.5 million to $35.1 million. Compared to its first-quarter earnings, however, this was a three percent rise (see Finisar Revenues Dip).
CSFB set a 12-month target of $16 per share on the stock. Other Wall Street analysts are less bullish on Finisar, citing the 22 percent appreciation in the stock over the past two weeks. Finisar is currently trading at 11.4 times 2002 sales of $190 million.
— Jo Maitland, Senior Editor, Byte and Switch