Fabrinet Shares Plunged: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of optical and electronic components builder Fabrinet (NYSE: FN  ) got trashed this morning, falling as much as 14.8% on very heavy trading volume.

So what: After Friday's closing bell, Fabrinet's largest customer, Oclaro (Nasdaq: OCLR  ) , delivered notice to end a long-lived supply relationship with Fabrinet. You might have expected competitors such as Oplink (Nasdaq: OPLK  ) and Ciena (Nasdaq: CIEN  ) to jump on the news that Oclaro was shopping around for new suppliers, but that didn't happen. The entire optical industry is in the dumps today. Hmm.

Now what: Analysts and industry watchers generally see the announcement as a negotiating ploy by Oclaro rather than a break-up letter. "[We] do not anticipate any change in Fabrinet's revenue or earnings through fiscal year 2012 based on Oclaro's announcement," explains Deutsche Bank.

So this drop feels more like a buy-in opportunity than a panic signal. Just remember to keep your options open. For example, optical networking specialist and five-star CAPS stock Infinera (Nasdaq: INFN  ) is also falling hard today.

Interested in more info on Fabrinet? Add it to your watchlist.