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Finisar Still Undervalued After Apple Deal

We are maintaining our fair value estimate for the no-moat firm.

Apple announced on Dec. 13 that it has awarded $390 million to

Apple’s investment will create about 500 jobs at the Sherman facility, and all of the VCSELs Apple purchases from Finisar will be produced in either the Sherman facility or Finisar’s existing 4-inch wafer facility in Allen, Texas. Finisar is likely to run a quarterly production run rate of $130 million over the next few quarters, with $100 million run rate at Sherman and a $30 million maximum run rate at Allen. We have long suspected that Finisar is more likely to gain market share, as Apple encourages more suppliers to the space to compete with the de facto supplier, Lumentum. Apple noted that in the fourth quarter of 2017, it will purchase 10 times more VCSELs than were previously manufactured around the globe over a similar period.

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About the Author

Alex Zhao

Equity Analyst

Alex Zhao, CFA, is an equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the telecommunications industry.

Before assuming his current role in 2016, Zhao led Morningstar’s U.S. mutual fund database performance team. He has worked for Morningstar since 2010, progressing from performance analyst to investment analyst for Morningstar’s Investment Management group, a unit of Morningstar, Inc.

Zhao holds a bachelor’s degree in economics and mathematics from Kenyon College, and he is pursuing a master’s degree in business administration from the University of Chicago Booth School of Business. He also holds the Chartered Financial Analyst® designation.

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