On outlook
When Finisar reported its third-quarter results in March, the stock dropped despite ticking all the right boxes — a good quarterly report and a decent outlook. However, a few analysts were concerned about the prospects of the company’s telecom side of the business. But then, the recent cues from the industry are positive, and the fact that Finisar itself had issued decent guidance last time means that we should expect a good performance from its telecom business.
As I mentioned in the beginning, Ciena Corporation (NASDAQ:CIEN) recently posted better than expected results and backed it up with a solid outlook, which was well ahead of what analysts were expecting. Ciena Corporation (NASDAQ:CIEN) expects to benefit from the multi-year upgrade cycle of telecom infrastructure and its bellwether clients such as AT&T Inc. (NYSE:T). The aggressive roll out of 4G networks in North America and abroad should be tailwinds for Ciena Corporation (NASDAQ:CIEN), and the presence of a customer such as Ma Bell further strengthens its position.
Now, even Finisar is poised to benefit from AT&T’s network upgrades as the carrier’s spending would positively affect Finisar’s top line. More importantly, AT&T should continue to propel Finisar’s telecom business for the next couple of years as it would be spending $20 billion to upgrade its network apart from spending $21 billion this year. AT&T is accelerating its 4G LTE deployment this year, and this is certainly good news for the likes of Finisar.
Moreover, as I’d said earlier, the datacom business has been doing well and had improved 11% in the previous quarter. The long-term prospects of this business look good as more data centers are built and its major customer Cisco Systems, Inc. (NASDAQ:CSCO) gets more aggressive on the cloud.
With strength in both the telecom and datacom businesses, Finisar could once again provide a decent outlook.
The bottom line
On the whole, Finisar looks well-placed to break out next week, and there are chances that it won’t disappoint. For the complete analysis of the company’s results and for more clarity on where it is headed, check back again next week.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Will This Stock Spring Back to Life Next Week? originally appeared on Fool.com is written by Harsh Chauhan.
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