Cloud Growth, Smartphone Sensors Should Boost Finisar
We see value in the no-moat fiber-optics manufacturer today.
Alex Zhao: The fiber-optics industry is known for boom and bust cycles that cause large swings of business performance for manufacturers, such as the ramp and subsequent sharp reduction of optics orders from China in 2016 and 2017, respectively. However, in the long term, we believe the advent of the public cloud will inject some secular growth in high-speed fiber optics used to interconnect hyperscale data centers for delivering and hosting cloud services.
As the industry leader, Finisar is well positioned to benefit from this trend in the long run with its high-speed data-comm products. Robust growth in data-comm optics is driven by data center speed upgrades to 100 gigs per second and eventually, 400 gigs per second, over the next few years, in our opinion.
Alex Zhao does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.