Finisar Leaves Traders Yearning

Ryan Bhandari  |

Networking equipment maker Finisar Corp. (FNSR) shares plunged over 20% in afterhours trading Thursday after the company disappointed Wall Street with its fourth quarter results and weak guidance. Shares closed trading at $25.25, but dipped $19.60 after market close.

Finisar had not dipped below $20 since Dec. 3, 2013.

Rounding out Finisar’s fiscal year, Q4 in 2014 showed net income of $28.375 million, or 27 cents per share, compared to $3.87 million, or 4 cents per share, for the same quarter in 2013. On an adjusted basis, the company reported a profit of 36 cents per share, missing analyst estimates of 38 cents per share.

Finisar’s sales for Q4 grew 26% year-over-year to $306 million from $243 million, a number that surpassed analysts’ estimates of $303 million.

Net income for the fiscal year ending in April 2014 was about $111 million, or $1.16 per share, as compared to a net loss of $5.45 million, or 6 centsper share, for 2013.

Total revenue for the 2014 fiscal year was $1.15 billion compared $983 million for 2013.

When assessing the differences between Q3 and Q4 of 2014, the gains are more modest, but still positive: a 4.8% increase in net income from Q3 to Q4. EPS also increased by 1 cent from 27 to 28 cents. Over the same time period, revenues increased by 4.1% from $294 million to $306 million.

Providing a sharp contrast to the year-over-year comparison, these numbers show how much the rate of Finisar's price growth has slowed since last April. The stock’s price nearly doubled in the last year, but most of that growth came in the first three quarters of the 2014 fiscal year.

The company is indicating that next quarter’s revenues will be in the range of $320 to $335 million. Finisar also expects non-GAAP earnings per fully diluted share to be in the range of 30 to 34 cents. In contrast, analysts are projecting earnings of 41 cents per share on $317 million dollars in revenue.

Overall sentiment seems to be in agreement that Finisar will remain profitable and grow its revenues. Seven straight quarters of growth tends to do that. But with a P/E of 30, Finisar needs to justify its position as a growth play, and missed earnings isn’t the way to do it.  

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