Finisar (FNSR) Price Target Lowered to $20 at Goldman Sachs

Goldman Sachs maintained a Neutral rating on Finisar (NASDAQ: FNSR) and reduced its price target to $20.00 (from $23.00). The change follows Q1 results and guidance. Analyst Kent Schofield said guidance creates uncertainly around margin and trends.

"We came away from earnings with increased uncertainty around Finisar’s near-term revenue growth trajectory and margin sustainability. On the margin front, we now model FY15 at 31.2%, down from our prior estimate of 32.2% and well below FY14 at 36%, driven by lower volume growth, ongoing shipments to China, upcoming telecom price declines, and rising depreciation costs. From a revenue standpoint, we estimate datacom (exwireless transceivers for China) was flattish qoq and will be down in the October quarter, a contrast to the prior six quarters of consecutive sequential growth," said Schofield.

"As a result, we lower our revenue estimates by 5-6% and our FY15-17E EPS falls to $1.12/$1.30/$1.46 from $1.39/$1.53/$1.64. With that said, we believe these concerns are largely priced in, with share underperforming optical peers YTD and trading at roughly a 13X P/E multiple in after hours. Longer-term positive trends of exposure to data center upgrades, increased fiber usage, and high Web 2.0 exposure remain intact, but we stay on the sidelines as we look for more clarity on datacom spending trends and adoption of coherent optics within telecom," he added.

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 $18.37 yesterday.

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