I was expecting fiber optics component supplier Finisar Corporation (NASDAQ:FNSR) to lift the pall of gloom surrounding the optical networking industry, but that honor instead went to Ciena Corporation (NASDAQ:CIEN). Ciena Corporation (NASDAQ:CIEN)’s latest results put fears of a tepid telecom spending environment to rest, and this rubbed off onto the others in the industry.
Ciena Corporation (NASDAQ:CIEN) surprised the Street by posting a profit, and its guidance for the ongoing quarter rounded off a solid earnings report. The company’s expectation of $465 million to $495 million in revenue for the current quarter is in line with consensus estimates at mid-point. This indicates that Ciena Corporation (NASDAQ:CIEN)’s business is witnessing strength, and it won’t be surprising if it continues to get better.
But when Finisar’s turn came to report earnings, the stock was given a cold reception and fell more than 8%. So, what did Finisar Corporation (NASDAQ:FNSR) do wrong? Well, nothing as such. Finisar’s revenue matched Street estimates, while earnings trumped expectations by a penny.
A solid quarter was accompanied by a decent outlook. Finisar Corporation (NASDAQ:FNSR) expects revenue of $235 million to $250 million in the ongoing quarter, while earnings are expected to be in the $0.15-$0.19 range. This is slightly better than the Street’s projection of $241 million in revenue and $0.16 in earnings, at mid-point.
However, some analysts, such as Simon Leopold of Raymond James, aren’t too sure of the company’s telecom side of the business. Leopold says that Finisar’s “higher outlook doesn’t justify meaningful appreciation,” apart from listing a number of headwinds that might affect its performance. Opinions such as these perpetrated a drop in the stock price, but I believe investors should be jumping at this opportunity. Let’s see why.