UPDATE: Cowen Starts Oclaro (OCLR) at Outperform
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(Updated - August 8, 2016 9:29 AM EDT)
Cowen initiated coverage on Oclaro (NASDAQ: OCLR) with an Outperform rating and a price target of $9. Analyst Paul Silverstein thinks the company will benefit from an ongoing, still early 100G optical upgrade cycle, and he sees strong growth and improving margins.
"While investors acknowledge OCLR’s first mover advantage with CFP2ACO, we think a rich and expanding portfolio, along with what we see as a stronger/ longer cycle, will drive growth and profitability ahead of expectations," said Silverstein.
"Oclaro specializes in high-speed optical component technology, and has expertise in two critical components of next generation optical communications, coherent or telecom optics and data center optics. As an early leader in the 100G+ optical market, Oclaro should continue to benefit from a strong, early stage multiyear 100G + optical upgrade cycle. While we recognize the inherent risk in believing and saying that 'it is different this time,' we expect this optical upgrade cycle to prove stronger and, most notably, longer than previous upgrade cycles and, accordingly, than what most investors appear to believe driven by a far broader set of customers and market opportunities.The 100G+ optical market, which includes Data Center Interconnect (DCI), Metro and Long-Haul end markets, is currently in the early stage of a multiyear upgrade cycle. Infonetics (IHS) projects 48% growth for the 100G+ coherent optical market in calendar 2016 and approximately 60% compound annual growth rate (CAGR) over the CY14 – 18 period. Similarly 100G data center optical market is also in the initial stages of a multiyear upgrade cycle. Infonetics (IHS) projects over 30% CAGR for 100G+ data center optics market over the CY16 – 19 period," added the analyst.
Shares of Oclaro closed at $6.31 yesterday.
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