Why Finisar Shares Surged

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 Finisar (NASDAQ: FNSR  ) , a designer of optical subsystems and fiber-optic components, popped as much as 13% after the company reported better-than-expected fourth-quarter results.

So what: For the quarter, Finisar saw a rebound in 10G and 100G Ethernet receivers and transponders which helped boost revenue by 2% to $243.4 million as adjusted-EPS came in at $0.20. Comparatively, Wall Street had only been expecting a profit of $0.17 per share on $242.6 million in sales. The real boost came from Finisar's forward guidance, which calls for $245 million to $260 million in sales and $0.22-$0.26 in EPS in the first quarter. Wall Street had only been forecasting $0.19 in EPS and $248.9 million in revenue.

Now what: We are seeing this surge across the board in the fiber-optic sector. Between AT&T pledging to spend $14 billion in wireless infrastructure upgrades over a three-year period last year, and Sprint-Nextel expected to use a good chunk of SoftBank's majority stake cash to expand its 4G LTE network, we knew that it was only a matter of time before we saw a trickle-down effect to fiber-optic providers. There is still room to run for these remarkably cheap fiber-optic companies, including Finisar, and I wouldn't be surprised if the trickle-down effect soon began to spread to other networking equipment suppliers.

Craving more input? Start by adding Finisar to your free and personalized watchlist so you can keep up on the latest news with the company.

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