Monday, May 9, 2011

Finisar Corporation (NASDAQ: FNSR) Q3 2011 Price Target

Recent price: 23.36$
P/E Ratio: 24.98
3 Months Target Price: 30$

Company Description
Data provided by Reuters explains that Finisar Corporation, incorporated in April 1987, is a provider of optical subsystems and components that connect short-distance local area networks, and storage area networks, and longer distance metropolitan area networks, fiber-to-the-home networks, cable television networks and wide area networks. The Company’s optical subsystems consist primarily of transmitters, receivers, transceivers and transponders, which provide the fundamental optical-electrical interface for connecting the equipment used in building these networks, including switches, routers and file servers used in wireline networks as well as antennas and base stations for wireless networks.

The Company operates in one reportable segment comprising optical subsystems and components. Optical subsystems consist primarily of transceivers sold to manufacturers of storage and networking equipment for SANs and LANs and MAN applications. Optical subsystems also include multiplexers, de-multiplexers and optical add/drop modules for use in MAN applications. Optical components consist primarily of packaged lasers and photo-detectors which are incorporated in transceivers, primarily for LAN and SAN applications.

Confidence Margins
Strong resistance $33.48 (+43%)
Light resistance $30.15 (+29%)
Light support $23.12 (-1%)
Strong support $20.70 (-11%)

Finisar corporation's stock has been undervalued over the past weeks. It seems that investors are seeing the offer for all the outstanding shares of Ignis ASA. The company has proved to have significant earning power and will continue to surprise analysts. At current prices, the company seems very attractive.

Entry strategy
For the cautious investor:
Buy the stock for 23.00$ or less. Keep this position on close watch as the light support is not far down.

For the risk-taking trader:
The September 2011 26$ call option contract seems to be the right position to take as it offers a fair potential of profit, they can be acquired for about 350$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 30$, or keep it until 33$ if you are more bullish in your own analysis.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 30$. This should provide a satisfactory return if the underlying reaches the target price as the contracts will get in the money.

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