Raising Ests and PTs On All Optical Companies After Expert Call - Piper Jaffray (OCLR) (AAOI) (FN) (FNSR) (LITE) (NPTN)
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Piper Jaffray analyst raised revenue and EPS estimates on his entire sector this morning as he expects the strength in optical demand to continue and consensus estimates don’t reflect the magnitude and sustainability of this cycle. The analyst hosted an expert call with Andrew Schmitt, the founder and lead analyst at Cignal AI.
The analyst was very encouraged by Schmitt's comments toward CFP2-ACO demand, and he believes the industry continues to buy everything that can be produced. Schmitt estimated the industry has shipped ~5 – 6K ACO modules through the end of Q3, the majority of which are being shipped by Oclaro.
While 35.0% gross margins have historically been viewed as the peak for optical component suppliers, the analyst believes some optical companies will be either reporting or guiding for gross margins above 35.0%. This will flow through to better than expected operating margins and the leaders in may even start generating greater than 15.0% operating margins.
All companies are rated Overweight.
Oclaro's (NASDAQ: OCLR) price target goes to $10.50 from $9.00.
Applied Optoelectronics' (NASDAQ: AAOI) PT goes to $27 from $24.
Fabrinet's (NYSE: FN) PT goes to $53 from $50.
Finisar's (NASDAQ: FNSR) PT goes to $38 from $31.
Lumentum's (NASDAQ: LITE) PT goes to $47 from $38.
NeoPhotonics' (NYSE: NPTN) PT goes to $20 from $17.
Shares of Oclaro closed at $8.79 yesterday.
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