FNSR around current levels is extremely attractive!!!
Finisar's industry-leading products include optical transceivers, optical engines, active optical cables, optical components, optical instrumentation, ROADM & wavelength management, optical amplifiers, and RF-over-Fiber.
Its world-class products enable high-speed voice, video and data communications for networking, storage, wireless, and cable TV applications, and for more than 25 years has created critical breakthroughs in optics technology and supplied system manufacturers with the production volumes needed to meet the exploding demand for network bandwidth.
Apple, Inc. (AAPL) announced it's giving Finisar Corporation (FNSR) $390M to build a new 700,000-square-foot manufacturing plant in Sherman, Texas. Finisar is going to hire 500 people to work on the laser sensor in the TrueDepth camera in the iPhone X.
The investment of Apple's commitment to invest $1B in U.S.-based companies with its Advanced Manufacturing Fund.
Apple says that Finisar is going to work on both research & development and high-volume production of optical communications components. The most complicated components are the vertical-cavity surface-emitting lasers (VCSELs) used in the iPhone X for Face ID, Animoji, Portrait mode and other face-mapping technologies. But Finisar also works on proximity sensors including the ones in the AirPods.
It's quite easy to understand why Apple is investing in Finisar. There are simply not enough suppliers in this field today. In the fourth quarter of 2017 alone, the Company will purchase 10 times more VCSEL wafers than the entire VCSEL production in the world during the fourth quarter of 2016. So Apple needs to foster production.
The new facility should be up and running at some point during the second half of 2018.
Prior to Apples announcement, FNSR's market cap was roughly $2.2B - trading at a forward P/E of just over 13 and a five year price to earnings growth rate of just over 1, and an intrinsic book value of 1.35. So, as you can see, even without Apple's investment, Finisar was arguably already somewhat undervalued. And with the Apple news, seals the attractive valuation metrics we like to look for when it comes to growth opportunities on a go-forward basis.
Further, Finisar has over $1.2B in cash on the books, and a management debt level of just over $720M. The Company increased 2017 earnings by over 500%, and is expected to grow its bottom line by over 15% over the next five years. This is all without the Apple deal, which now puts Finisar in the spotlight as the global technology leader in optical communications.
Currently trading at $16.65 we have a technical long term target right around $43.
Alex Green
VikingCrest
AI
