Please ensure Javascript is enabled for purposes of website accessibility

Why Finisar Corp. Gained 25% in March

By Anders Bylund - Apr 7, 2016 at 2:56PM

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

Telecoms in China and America are doubling down on high-speed networking equipment, setting the stage for a solid earnings report plus rosy market forecasts.

Finisar's QSFP28 100-gigabit transceiver. Image source: Finisar.

What: Shares of Finisar (FNSR) rose 25.1% in March 2016, according to data from S&P Global Market Intelligence. Thanks to a solid third-quarter report, the stock jumped as much as 20% in a single day, and that's all she wrote.

So what: Third-quarter earnings stayed flat year over year on 3.7% lower revenues. If that sounds unremarkable or downright disappointing, consider that analysts had expected earnings to slide 12% lower. The reported results were on the top end of Finisar's own earnings guidance for the quarter, despite only mid-guidance revenues.

Sales were particularly healthy in the telecom department, driven by strong orders from the three largest service providers in China. North American telecoms are also busy upgrading their metro networks, helping that segment again. Profit margins were helped by a surprisingly rich product mix, as customers flocked to high-margin products like the 100-gigabit QSFP28 transceiver.

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.

Now what: The Chinese infrastructure buildout is unlikely to stop anytime soon, and then the North Americans will get ready to take advantage of newfound bandwidth licenses won in the the soon-to-open FCC auction.

Finisar doesn't like to provide guidance beyond the next quarter, but it seems like it -- and the rest of the optical networking industry -- is pretty much done with the recent market downturn. Finisar shares had gained 55% over the last six months at press time, and some rivals have actually doubled that fantastic half-year return.

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
328%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

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.