Please ensure Javascript is enabled for purposes of website accessibility

Why Finisar Corporation Stock Fell 18.3% in March

By Steve Symington - Apr 12, 2017 at 7:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The optical communications technologist fell after a disappointing quarter.

What happened

Shares of Finisar Corporation (FNSR) declined 18.3% in the month of March, according to data provided by S&P Global Market Intelligence, after the fiber optic communications subsystems and components company released weaker-than-expected fiscal third-quarter 2017 results.

So what

The stock fell roughly 20% on March 10, the day after Finisar revealed quarterly revenue grew 23.1%, to $380.6 million, which resulted in adjusted net income of $67.2 million, or $0.59 per share, up from $0.25 per share in last year's fiscal Q3. That might not seem disappointing at first glance, but keep in mind Wall Street was expecting revenue and earnings of $389.6 million and $0.62 per share, respectively.

Fiber optic cables

IMAGE SOURCE: GETTY IMAGES.

Now what

Finisar also provided guidance for fiscal fourth-quarter revenue of $360 million to $380 million, or 16% year-over-year growth at the midpoint, and adjusted earnings per diluted share of $0.50 to $0.56. Both ranges were below analysts' expectations for revenue of $383.4 million and earnings of $0.58 per share.

During the subsequent conference call, however, Finisar CEO Jerry Rawls insisted the company is "optimistic for fiscal year 2018," as Chinese service providers are expected to begin domestic deployments of ROADMs in the second half of this calendar year, while Finisar anticipates continued growth from sales of its 100-gigabit QSFP28 transceivers driven by hyperscale data centers.

"We are currently sold out on this product," Rawls elaborated, "and despite our continuing to add capacity, we expect that sold-out situation to last at least through the end of calendar year 2017." 

Nonetheless, shares of Finisar are still up nearly 35% over the past year as of this writing, so it's hard to blame investors for bidding down the stock as the company fell short last month. But Finisar is also trading at a reasonable 20.6 times trailing-12-month earnings and just 10 times forward estimates after the plunge. If Finisar manages to reaccelerate growth in the coming quarters, I suspect its share price will follow suit.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Finisar Stock Quote
Finisar
FNSR

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
345%
 
S&P 500 Returns
119%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.