B Riley analyst slashes price target for Finisar

NEW YORK (AP) — B. Riley & Co. backed its "Buy" rating for Finisar but slashed its price target by more than 30 percent, after the company issued a disappointing outlook for the quarter.

THE BACKGROUND: Finisar, based in Sunnyvale, Calif., said its profit fell 20 percent to $13.2 million, or 14 cents per share. Excluding one-time items, the company said it posted an adjusted profit of 21 cents per share.

Revenue edged up slightly to $239.9 million from $236.9 million.

Analysts, on average, expected a profit of 21 cents per share on $242.6 million in revenue, according to a FactSet poll.

For the current quarter, Finisar said it expects to post a profit of 11 cents to 15 cents per share on $218 million to $233 million in revenue. That was well below average analysts' estimates of a profit of 24 cents per share and $249.8 million in revenue.

THE ANALYSIS: B. Riley analyst Dave Kang said that while there was some optimism earlier this year that demand for optical components was starting to recover, Finisar's mixed fourth-quarter results and disappointing first-quarter guidance show that it remains weak.

"Although the company believes its new products will enable the company's top-line to grow in the second half of calendar year 2012, it remains to be seen, as it is very difficult for new products to show traction during downturns," Kang wrote in a note to investors.

The analyst backed his "Buy" rating citing Finisar's current valuation, but cut his price target to $18.70 from $27.20, saying that the company's profits for fiscal 2013 and fiscal 2014 will be lower than he previously expected.

THE SHARES: Up 25 cents to $13.72 in afternoon trading, after climbing as high as $14.06 earlier in the session. Despite the increase, the stock remains close to its 52-week low of $12.26.

Shares of Finisar Corp., have fallen about 69 percent from their March 2011 peak. Over the past four months, they have lost about 42 percent of their value.