Why Finisar Shares Blasted Off

Why Finisar Shares Blasted Off

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Finisar have gained nearly 15% today after the company announced that its fiscal first quarter (ending in July) will be above earlier expectations -- both its own and Wall Street's. The company so impressed the market that trading had to be halted following the early surge.

So what: Finisar's preliminary first-quarter guidance now pegs its revenue at $266 million, above both the analyst consensus of $253.4 million and the former high end of its guidance range, which had been $245 million to $260 million in revenue. Finisar also expects its earnings per share to be either $0.30 or $0.31, well ahead of Wall Street's $0.24 consensus and its own previous range of $0.22 to $0.26.

Finisar also notes that its (preliminary) record-setting revenue rose primarily on strong sales of Ethernet transceivers, which helped push gross margins up from the previously estimated 33% range to a range of 34.5% to 35%.

Now what: Finisar's had a strong summer, as its stock is now up 60% in the past three months. However, there's nothing here that indicates a screaming buy -- Finisar is still losing money on an officially reported trailing 12-month basis, and its most recent free cash flow figures give it a price-to-free-cash-flow ratio of about 35.7 after the pop. There could be more growth ahead, but there might also not be -- Finisar's earnings history shows a lot of ups and downs in earnings and free cash flow.

Want more news and updates? Add Finisar to your watchlist now.

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The article Why Finisar Shares Blasted Off originally appeared on Fool.com.

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