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OCLR

Oclaro

$6.86

0.37 (5.70%)

, FNSR

Finisar

$19.89

0.54 (2.79%)

10:13
11/22/17
11/22
10:13
11/22/17
10:13

Oclaro rises as analyst makes case for potential acquisition

Shares of Oclaro (OCLR) are on the rise after MKM Partners analyst Michael Genovese recommended investors buy the stock, citing an uptick in Chinese market commentary and noting that the company is in a "good position" to choose an acquisition partner and create an even stronger company going forward. Among potential buyers, the analyst argued that Oclaro may be an especially attractive acquisition candidate for Finisar (FNSR), while Inphi (IPHI) may be a "good strategic fit." ATTRACTIVE ACQUISITION CANDIDATE: In a research note to investors, MKM Partners' Genovese reiterated a Buy rating on Oclaro. The analyst argued that he sees this as a "good entry point" because the company's commentary on the timing of a Chinese market recovery has slightly upticked since earnings. Oclaro's leadership in Indium Phosphide Datacom lasers positions it well for market leadership in upcoming 400G/600G/1.2Tbps Datacom and Telecom product cycles, putting Oclaro in a "good position" to choose an acquisition partner and create an even stronger company going forward, he argues. According to his industry checks, Oclaro makes the best Datacom lasers in the industry, and makes both directly modulated lasers and electro-absorption modulated lasers. Therefore, Genevose believes it would be an "especially attractive" acquisition candidate for Finisar. Datacom is Finisar's largest product category, but the company makes directly modulated lasers only and not electro-absorption modulated lasers, he pointed out, adding that it may need Oclaro if it wants to remain competitive in Datacom at speeds of 400G and above. While merging with Finisar would give Oclaro greater scale in the Optical market, the analyst said that combining with a Silicon player may create an even stronger company. As the industry moves to 400G and above, likely starting in early 2019, the combination of Oclaro's Indium Phosphide lasers and transceiver/modulator PICs would combine well with a Silicon player's DSP, drivers and amps to create an Optical module powerhouse, Genovese added. He thinks a company like Inphi is a perfect example of a good strategic fit with Oclaro. PRICE ACTION: In morning trading, shares of Oclaro have gained nearly 5% to $7.20. Year-to-date the stock is down 20%.

OCLR

Oclaro

$6.86

0.37 (5.70%)

FNSR

Finisar

$19.89

0.54 (2.79%)

IPHI

Inphi

$44.14

1.02 (2.37%)

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OCLR Oclaro
$6.86

0.37 (5.70%)

11/16/17
MKMP
11/16/17
NO CHANGE
MKMP
Buy
Oclaro remains an attractive acquisition target, says MKM Partner
MKM Partners analyst Michael Genovese met with Oclaro CEO Greg Dougherty and said the conversation was consistent with what the company reported two weeks ago. Management noted that a recovery in China should occur in the middle of 2018, or potentially sooner, and talked about being the leading maker of Data Center lasers, with EML and DML lasers. The analyst believes Oclaro's EML lasers make it a very attractive acquisition target for a company such as Finisar (FNSR), which needs EML market exposure. Genovese rates Oclaro a Buy with a $10 price target.
11/02/17
11/02/17
DOWNGRADE

On The Fly: Top five analyst downgrades
Catch up on today's top five analyst downgrades with this list compiled by The Fly: 1. Square (SQ) downgraded to Hold from Buy at Stifel with analyst Scott Devitt citing valuation for the rating change and upped his price target for the shares to $36 from $29. 2. Papa John's (PZZA) downgraded to Neutral from Buy at BTIG with analyst Peter Saleh citing an uncertain sales outlook, increased competitive pressures, and modest earnings growth near-term. 3. Newell Brands (NWL) downgraded to Neutral from Overweight at JPMorgan with analyst Andrea Teixeira citing the company's third quarter miss and lowered fiscal 2017 guidance. This marks the second time in two months Newell lowered its outlook, Teixeira tells investors in a post-earnings research note. 4. Oclaro (OCLR) downgraded to Buy from Strong Buy at Needham and to Hold from Buy at Craig-Hallum. 5. DSW (DSW) downgraded to Neutral from Buy at B. Riley FBR with analyst Jeff Van Sinderen saying the multi-year fashion shift away from boots is intensifying, and is being made worse by warmer weather. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.
11/02/17
STFL
11/02/17
NO CHANGE
STFL
Facebook capex guidance positive for optical component suppliers, says Stifel
Stifel analyst Patrick Newton said Facebook's (FB) guidance for capital expenditures to double from a targeted $7B in 2017 to $14B in 2018 as a positive data point for Finisar (FNSR), Lumentum (LITE), Oclaro (OCLR), Fabrinet (FN), Infinera (INFN) and Ciena (CIEN). He believes Facebook's guidance reaffirms that cloud infrastructure spending is a multi-year trend and the weakness currently being experienced by optical component suppliers represents a near-term issue around timing of expenditures.
11/02/17
NEED
11/02/17
DOWNGRADE
Target $9
NEED
Buy
Oclaro downgraded to Buy at Needham on weak guidance
As previously reported, Needham analyst Alex Henderson downgraded Oclaro to Buy from Strong Buy and cut his price target to $9 from $14. Henderson is citing the company's soft Q2 guidance and management commentary that China will not recover until the second half of 2018 as a result of inventory overhang and limited customer demand visibility.
FNSR Finisar
$19.89

0.54 (2.79%)

11/01/17
JEFF
11/01/17
INITIATION
JEFF
Buy
Finisar assumed with a Buy at Jefferies
Jefferies analyst George Notter assumed coverage of Finisar with a Buy rating and $28.50 price target. The analyst says that while the company's recent performance has been challenged, its key growth areas like 100G QSFP28 client optics and 3D sensing remain promising.
11/06/17
GSCO
11/06/17
DOWNGRADE
Target $22
GSCO
Neutral
Finisar downgraded to Neutral from Buy at Goldman Sachs
Goldman Sachs analyst Doug Clark downgraded Finisar (FNSR) to Neutral and his Telecom Equipment coverage view to Neutral from Attractive citing a more cautious stance on the optical component cycle. The analyst sees softening end markets, rising inventories and industry capacity. For Finisar, which reports earnings in early December, Clark thinks the company's guidance has "significant downside risk" relative to consensus expectations. The analyst cut his price target for the shares to $22 from $27. Finisar closed the trading day down 15c to $19.25. Elsewhere in Telecom Equipment sector, Clark has Buy ratings on Arris (ARRS) and Infinera (INFN), Neutral ratings on Acacia Communications (ACIA), Ciena (CIEN) and Lumentum (LITE), and a Sell rating on Adtran (ADTN).
IPHI Inphi
$44.14

1.02 (2.37%)

10/17/17
DADA
10/17/17
INITIATION
Target $40
DADA
Neutral
Inphi initiated with a Neutral at DA Davidson
DA Davidson analyst Mark Kelleher initiated Inphi with a Neutral rating and a $40 price target, noting the company is well positioned for continued top and bottom line growth. Kelleher cites Inphi's strong product offering of Transimpedence Amplifiers and optical drivers as well as its offering of COLORZ optical platform in the data center market. The analyst adds however that much of the expected growth is already priced in to the stock.
10/16/17
DADA
10/16/17
INITIATION
Target $40
DADA
Neutral
Inphi initiated with a Neutral at DA Davidson
DA Davidson initaited Inphi with a Neutral and $40 price target citing valuation.
08/08/17
CHLM
08/08/17
NO CHANGE
Target $44
CHLM
Buy
Inphi price target lowered to $44 from $49 at Craig-Hallum
Craig-Hallum analyst Richard Shannon lowered his price target for Inphi to $44 from $49, while noting that the company's soft Q3 guide was not a surprise based on reports last week, as the inventory situation in China remains cloudy at best. The analyst reiterates a Buy rating on the shares.
08/08/17
ROTH
08/08/17
NO CHANGE
Target $44
ROTH
Buy
Inphi price target lowered to $44 from $51.70 at Roth Capital
Roth Capital analyst Roth Capital lowered his price target for Inphi to $44 from $51.70 on valuation as well-known market challenges constrict guidance, but long-term prospects remain. The analyst reiterates a Buy rating on the shares.

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