Finisar On The State Of The Optical Components Sector

Finisar reported numbers on Thursday after the close of regular market trading Thursday night. Expectations going into the earning report were muted as best.

The company reported earnings of $0.50 per share on revenues of $357.5 million versus Street expectations of $0.50 per share on revenues of $359.2 million. (Call it in-line)

For the current quarters (FQ1:18), Finisar guides earnings between a range of $0.37-$0.43 per share with revenues expected to check in at between $330-$350 million. At mid-points for each, investors are looking at $0.40 per share on revenues $350 million. Going into the earnings event, the sellside was expecting earnings of $0.51 per share on revenues of $370 million.

Soon after results were out, shares of Finisar dropped by about 4% taking the rest of the optical component sector along for the ride lower. There was almost a sense of euphoria as the shares of Finisar and the rest of the fiber optic component sector started dropping as the Finisar management said that current quarter revenues would be adversely affected due to the current slowdown in orders from Chinese OEMs.

Given the current tech hatred,even the slightest negative is magnified a hundred-fold but that changed once the conference call began.

However, shares started rebounding as the conference call highlight the company's opportunity in VCSEL (3-D sensors almost certainly from Apple), and expected strong revenues from the DC and 100 and 200g segments starting in FQ2:18 and finished the following trading day up $2.14 per share or $8.4%) to end the day and the week at $27.78 per share.

Management stated that FQ2 is not a "big revenue quarter" but that sales will blast off once FQ2 is over with.

Analysts are expecting Finisar to ship tens of millions of 3D sensing units to Apple in the October quarter and that 100G datacom and ROADM line cards business will also be very strong. In addition, the company and the sellside are both expecting that China will start to rebound shortly.

When questioned about DCI supply-demand imbalances, here's what Jerry Rawls, CEO of Finisar said, "Well, so far, there's still a shortage. And I hear people talk every now and then that says, Oh, well, we're coming close to being supply equals demand, but that's not the behavior we see from the big customers. So -- but it will happen. It's inevitable at some point supply is going to catch up with demand. And our belief is it will happen in the calendar year 2018 sometime.

Investors that are invested in the fiber optics components space should focus on that last paragraph. Demand from data centers for optical components is not going away anytime soon no matter how much the darksiders will try and convince you otherwise.

Finisar is probably the 4th company in the space that has said so in the last month or so.

From the horse's mouth is always better than listening to the obfuscation and oft-times downright falsehoods of the darksiders.

Of course, in this current environment where tech hatred is so high and everyone that comes on the boob tube is breaking an arm patting themselves on the back about being short this, that and the other in techland, buying tech is the hardest trade.

Most importantly, don't get taken in by those that are out there touting their magical positions.

Remember, in hindsight everyone is Albert Einstein.

Words to the wise.

(No position in fnsr)

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