UPDATE: MKM Partners Downgrades Finisar (FNSR) to Neutral on Datacom Competitive Concerns

(Updated - September 11, 2015 10:51 AM EDT)

MKM Partners downgraded Finisar (NASDAQ: FNSR) from Buy to Neutral with a price target of $15.50 (from $25.50). The change follows Q1 results and guidance. Analyst Michael Genoves pointed out continued deterioration in the datacom competitive environment.

"We are downgrading FNSR to Neutral from Buy, after soft earnings and guidance, because the Datacom components competitive and pricing environments continue to get worse. We are also becoming less convinced that there is an easy path to industry consolidation that will help alleviate the significant Optical components industry challenges," said the analyst.

Commenting on read-through for other stocks, Genoves said, "The other Optical companies we follow have little exposure to the issues bothering the Datacom components market. Optical Systems makers Ciena (NYSE: CIEN) and Infinera (Nasdaq: INFN) actually slightly benefit from more competition and lower prices since they are customers. Finisar also called out a one quarter delay in a large 100G Metro Telecom deployment at a U.S. Tier 1 that sounds similar (but not exactly the same) to what Ciena recently highlighted. Nevertheless, we believe the negative revisions in Finisar's outlook are much more on the Datacom side than on the Telecom side."

"Optical components peer Lumentum (Nasdaq: LITE) is more insulated, in our view, from the problems in the Datacom market. Finisar is an incumbent that derives 75% of overall revenues from Datacom, while Lumentum is a relatively new challenger with only 20% of revenues from Datacom. As we look in CY16/FY17, we are much more confident in the demand and pricing environments for 100G Telecom (Metro and LH) components than we are for Datacom, and Lumentum has significantly more exposure to 100G Telecom than Finisar," added the analyst.

For an analyst ratings summary and ratings history on Finisar click here. For more ratings news on Finisar click here.

Shares of Finisar closed at $14.91 yesterday.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• JPMorgan Upgrades Roblox Corp. (RBLX) to Overweight
• Vertex Inc. (VERX) PT Lowered to $34 at BofA Securities
• Morgan Stanley Downgrades XP Inc. (XP) to Equalweight