Stock Alert for Oclaro Inc. (OCLR)

Oclaro Inc. (OCLR) is a tier-one provider of optical communications and laser components, modules and subsystems for a broad range of diverse markets, including telecommunications, industrial, scientific, consumer electronics and medical. The Company is a global leader, dedicated to photonics innovation with cutting-edge research and development (R&D) and chip fabrication facilities in the U.S., the UK, Switzerland, Israel, Korea and Italy, and in-house and contract manufacturing sites in China and Thailand with design, sales and service organizations in each of the major regions around the world.

Share Statistics (02-Sept-11)

FY2010 FY2011 % Chg Q32010 Q32011 % Chg
Symbol OCLR Revenue, $Mn 392.55 466.50 18.8% 112.71 109.18 -3.1%
Current price $4.70 Gross marg. 27.7% 26.5% -4.3% 30.3% 22.6% -25.4%
52wk Range: $3.23-$18.95 Oper. margin -7.2% -30.8%
Avg Vol (3m): 1,499,340 Net margin 3.2% -10.0% -412.5% 9.4% -33.7% -458.5%
Market Cap. 229.42M
Shares Outstanding 48.81M EPS, $ 0.37 -0.61 -264.9% 0.21 -0.46 -319.0%

Source: Reuters.com, SEC Filings.

Investment Highlights

Shares of OCLR traded as much as 15% higher on Friday on volume of over 2 million shares.  Over the last 52 weeks, the stock has ranged from a low of $3.23 to a high of $18.95.  OCLR is currently trading above its 50-day moving average of $4.58 and below its 200-day moving average $9.08.

Shares of the San Jose, Calif-based optical components maker gained 31.3% in the last five trading days and 1.3% in the last month.  Year-to-date, the stock is down 58.1%.

Early last month, the Company announced the expansion of its board of directors with the appointment of industry veteran Marissa Peterson.

Peterson was executive vice president for worldwide operations, services & customer advocacy for Sun Microsystems Inc. in Santa Clara, California, until her retirement in 2005. She currently serves on the board of directors for Ansell Ltd., Humana, Quantros and the Lucile Packard Children’s Hospital at Stanford, and previously served on the board of directors of SUPERVALU INC. and the board of trustees of Kettering University. She also runs an executive coaching practice focused on helping grow and develop leaders in the high-technology space.

According to OCLR chairman and CEO Alain Couder, Peterson’s experience with global customer advocacy programs and expertise in supply chain and logistics management will enable the Company to better serve its global customer base.

Source: http://investor.oclaro.com/releases.cfm

Financial Summary

OCLR reported revenues of $109.2 million for the fourth quarter of fiscal 2011, compared to $115.7 million in the third quarter of fiscal 2011.  Revenues in the quarter ended July 2, 2011, included initial shipments of new products including 40G coherent transponders, tunable XFP transceivers, 40G lithium niobate external modulators and an integrated ROADM line card.

GAAP gross margin was 23% for the fourth quarter of fiscal 2011, compared to 25% in the third quarter of fiscal 2011.  GAAP gross margin for the fourth quarter of fiscal 2011 included approximately 3% points of impact from excess and obsolete reserves and related inventory valuation charges. Non-GAAP gross margin was 23% for the fourth quarter of fiscal 2011, compared to 25% in the third quarter of fiscal 2011.

GAAP operating loss was $33.6 million for the fourth quarter of fiscal 2011, including $20 million of impairment charges following the company’s annual review of goodwill, compared to a GAAP operating loss of $6.6 million in the third quarter of fiscal 2011. Non-GAAP operating loss was $9.4 million, or 9% of revenues, for the fourth quarter of fiscal 2011, compared to a non-GAAP operating loss of $3.3 million, or 3% of revenues, in the third quarter of fiscal 2011. The Company is now investing $18.9 million a quarter in research and development, as of the fourth fiscal quarter of 2011, which is $7.4 million, or 64%, more than in the same quarter of the 2010 fiscal year.

Adjusted EBITDA was negative $4.7 million for the fourth quarter of fiscal 2011, compared to a positive $0.7 million in the third quarter of fiscal 2011.

GAAP net loss for the fourth quarter of fiscal 2011 was $36.7 million, including $20 million of impairment charges following the company’s annual review of goodwill, compared to a GAAP net loss of $9.8 million in the third quarter of fiscal 2011. Non-GAAP net loss for the fourth quarter of fiscal 2011 was $10.0 million, compared to a non-GAAP net loss of $4.5 million in the third quarter of fiscal 2011.

Cash, cash equivalents and restricted cash were $63.4 million as of July 2, 2011.

On July 26, 2011, the Company closed an increase in its line of credit from $25 million to $45 million and extended its term through August 1, 2014.  No amounts were drawn under this line as of July 2, 2011 .

First Quarter Fiscal 2012 Outlook

For the first quarter of fiscal 2012, the Company expects to report revenues in the range of $103 million to $113 million; non-GAAP gross margin in the range of 18% to 24%; and adjusted EBITDA in the range of negative $8.5 million to negative $2.5 million.

Source: http://investor.oclaro.com/releasedetail.cfm?ReleaseID=595106

Financial Strength (02-Sept-2011)

Company

Industry

Sector

S&P 500

Quick Ratio (MRQ) 1.28 1.72 2.03 0.75
Current Ratio (MRQ) 2.09 2.10 2.61 1.10
LT Debt to Equity (MRQ) 20.55 12.65 112.42
Total Debt to Equity (MRQ) 33.16 22.60 152.21
Interest Coverage (TTM) 0.86 0.94 22.93

Source: Reuters.com, SEC Filings.

Analyst Consensus

1-5 Linear Scale

Current

1 Month
Ago

2 Month
Ago

3 Month
Ago

(1) Buy 4 4 3 3
(2) Outperform 1 1 1 1
(3) Hold 3 2 2 1
(4) Underperform 1 2 1 1
(5) Sell 0 0 0 1
No Opinion 0 0 0 0
Mean Rating 2.11 2.22 2.14 2.4

Source: http://www.reuters.com/finance/stocks/analyst?symbol=OCLR.O

Consensus Estimates Analysis

# of Estimates

Mean

High

Low

1 Year Ago

SALES (in millions)
Quarter Ending Sep-11 6 108.44 111.00 106.54 140.92
Quarter Ending Dec-11 7 123.24 135.85 111.15 146.38
Year Ending Jun-11 8 469.27 473.65 468.20
Year Ending Jun-12 7 483.41 528.00 440.49 561.81
Year Ending Jun-13 6 574.94 610.00 546.79
EARNINGS (per share)
Quarter Ending Sep-11 7 -0.20 -0.03 -0.27 0.40
Quarter Ending Dec-11 8 -0.09 0.07 -0.22 0.39
Year Ending Jun-11 9 -0.03 0.06 -0.15
Year Ending Jun-12 8 -0.34 0.29 -0.75 1.38
Year Ending Jun-13 6 0.50 0.88 0.19 1.21
LT Growth Rate (%) 1 20.00 20.00 20.00 17.50

Technical Analysis

Source: http://stockcharts.com

OCLR is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

OCLR’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.

Comparative Analysis

Company Name Ticker Price per Mrkt. Cap. P/E P/S
Sept-02-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
JDS Uniphase Corp. JDSU 12.92 2.94B 13.89 11.64 1.62 1.46
Opnext Inc. OPXT 1.60 144.47M n/a 80.00 0.37 0.32
Finisar Corp. FNSR 20.87 1.88B 22.68 14.49 1.95 1.69
Semiconductor Equipment & Materials Median       9.30 n/a 1.24 n/a
Oclaro Inc. OCLR 4.70 229.42M n/a 10.93 0.47 0.40

Source: Thomson Financial

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