Today we are blessed with another teaser pitch from Ian Wyatt, who tells us he’s got the “one stock you must own” for this year … and he’ll tell you what it is just as soon as you sign up for his Top Stock Insights newsletter.
The basic spiel is like many that have relied on the rise of Apple or the rise of mobile computing to pitch us a stock — no surprise, that, since mobile is of course becoming far more important as more people access more data via smartphone or tablet instead of via desktop computer.
We’ve seen the same basic spiel based on the rise of the iPhone (and, more recently, the duopoly of Samsung and Apple in smart phones) used to pitch stocks like Corning (GLW), which makes the gorilla glass screens most of these portable devices use, and American Tower (AMT) or their competitors, which own the physical cell phone towers that become more valuable with each antenna placed on the tower. In fact, I glossed over this pitch the first time I saw it because I expected another teaser for Corning … but no, he’s got something different cooking this time around.
So what is it? Here are your clues:
“There’s a revolution coming… and Apple is leading the charge with the release of the new iPhone 5S and 5C…
“And as millions of users activate their new smartphones — one stock is set to soar 117%!…
“Making right now the perfect time to invest in this fast growing company Barron’s says is about to ‘break out’….”
He also makes the argument that every past iteration of the iPhone has led to huge climbs in the price of the secret stock he’s teasing … and that it’s now poised to “rocket up again.”
So what specifically does this company sell? He’s a little vague on that point, here’s what we’re told:
“Not just Apple… this little-known company profits every time an iPhone AND a Samsung Galaxy smartphone is activated.Are you getting our free Daily Update
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“New or old… this company cashes in every time Apple and Samsung sells a smartphone.
“All the slick features of Apple’s iPhones and Samsung’s Galaxy smartphones – simply can’t function without this company’s indispensible technology….
“iPhones and Samsung’s Galaxy phones need fast, limitless access to data… available 24/7… and streamed from cell towers and buildings all over the world….
“Apple iPhone 5 and Samsung Galaxy S III owners consume and upload more data than any other smartphones in history…. the amount of mobile Internet traffic in 2012 was greater than all prior years combined!
“And this is just the beginning… According to future projections, smartphone data usage is set to nearly double EVERY YEAR for the next 3 years!”
But then we get a few clues that are actually useful:
“All this skyrocketing mobile data usage means windfall profits for one company…
“You see, it’s this company that provides all the data iPhone and Samsung smartphone owners need.
“It owns pipelines of data that run to iPhones and Samsung smartphones that allow them to use apps and access the Internet at lightning fast speeds from anywhere, anytime.
“If that sounds complicated… it is. No ordinary company could be tasked with such a vital role.
“This company manufactures crucial systems… including lasers, photodetectors, and integrated circuits… that make up the heart of our nation’s mobile networks….
“It currently owns 1,157 patents in the US and overseas to protect and profit from this vital technology.”
Then a few more clues to toss into the ‘ol Thinkolator:
“Revenue almost doubled in a two years when carriers including Verizon and AT&T accelerated their mobile networks to 3G speeds.
“And now with these carriers upgrading their networks to 4G – Barron’s reports this company’s ‘revenue continues to ramp.’
“Plus, last year, cash on the books also increased, by $28.1 million, bringing this company’s total cash hoard up to $316.5 million… the sure sign of a healthy tech firm.
“And shares are cheap… the stock trades at just 14.8-times current year earnings and 13.4-times forward earnings. That’s not expensive at all – and well below the sector average P/E of 34!”
So … hoodat?
Thinkolator sez: This is Finisar (FNSR)
Finisar is a mid cap company, with a market capitalization of just over $2 billion, and they call themselves the “World’s Largest Supplier of Optical Solutions for the Communications Industry.” They’ve been around for about 25 years and public for 15, coming public just in time to get one of those ridiculous tech boom share prices in 1999 and 2000 (they hit $400 a share or so back then, the stock is right around $25 now after a very good year).
And the quotes from Barron’s are more or less accurate, though they’re from a Barron’s blog entry about the Citi analyst who thought FNSR and Ciena (CIEN) might be hitting an inflection point for a nice rise in their share prices … and now that it’s been a year since that article was posted, we can see that yes, they were at a nice inflection point — both are up nicely over the last year, and FNSR in particular had a very sharp climb starting last Summer, after they began to actually post earnings growth.
Will it continue? Well, analysts aren’t pointing to huge earnings growth like last year’s to continue (last year was something like 140% earnings growth), but the company is continuing to gradually increase market share and margins have held firm and their balance sheet looks good (the $316.7 million figure for cash on the books was accurate a quarter or two ago, it has grown … though they do have some debt, too, so it’s about $300 million in net cash), so analysts are still forecasting 25% earnings growth going forward.
Which, if true, would mean the shares are an easy buy here at about 19X current year earnings (their fiscal year ends next month) and 14X next year’s earnings.
I don’t know their products at all, other than that they seem to have a very wide offering of all of the optical switches and lasers and stuff that fiberoptic networks need — and they have had pretty flat to slowly declining sales to traditional telecom in recent years, but have pretty dramatically boosted their sales to data companies, presumably data centers who are using more optical equipment, which has kept the overall revenue number mostly climbing. They are not specifically leveraged to mobile over other segments of the telecom industry, but the growing demand for data is hitting all data centers, and presumably their optical equipment is or can be used in all the places where mobile data is brought into the fixed optical networks as a way to continue speeding up the system and increasing capacity.
So that’s about all I can tell you — it’s a decent looking company at first glance, and they’ve had a good year and the analysts think they’re undervalued based on their expected growth rate, but I don’t know a lot about them. If you’ve got an opinion on FNSR or optical networking or any of that jazz, feel free to chime right in with a comment below (or, of course, if you’ve tried out Top Stock Insights please hit us up with a review of your experience here).
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