Finisar Stock Overreacts; Investors Should Take Advantage Of The Correction

(RTTNews) - Shares of Finisar Corp.(FNSR) got whacked on Friday, falling by 23% to $26.98, after the company's 2017 guidance missed consensus estimates widely. We think the stock has at least 20% upside from current levels, and investors should take advantage of the weakness.

Finisar indicated that for the fourth quarter of fiscal 2017 it currently expects revenues in the range of $360 to $380 million, and non-GAAP earnings of approximately $0.50 to $0.56 per share. Analysts were modeling earnings of $0.58 per share on revenues of $393 million.

However in its earnings conference call, the company's Chairman and CEO - Jerry Rawls, said, "We are optimistic about FY18. We believe our revenues will grow again, starting from the first quarter. We expect continued growth from the sales of the 100-gigabit QSFP28 transceivers, mostly for hyperscale data centers."

FNSR also said it had a technical issue on its CFP 100G Telecom product with a couple customer, which it hopes will be resolved in the next quarter or two.

Other key takeaways from the CEO's speech

1. "We expect continued growth from the sales of the 100-gigabit QSFP28 transceivers, mostly for hyperscale data centers. We are currently sold out on this product and despite our continuing to add capacity, we expect that sold-out situation to last at least through the end of calendar year 2017. In addition, we expect to finally achieve qualification in the first quarter of FY18 for both our 100-gigabit coherent CFP2-ACO transceiver and our ROADM line card for use in the Verizon metro upgrade."

2. "We also believe the Chinese service providers will begin domestic deployments of ROADMs in the second half of calendar 2017."

3. "Finally, during the third quarter, we shipped many thousands of our high-powered VCSEL arrays for 3D sensing. We are continuing to add manufacturing capacity in anticipation of strong demand from this application in the second half of calendar year 2017. Besides, the Q4 guidance still represents growth from year-ago numbers. We believe the selling is overdone and the stock has at least 20% upside from current levels.