I have been warning about the optical sector -- a space occupied by companies such as Applied Optoelectronics (AAOI) - Get Report , Oclaro (OCLR) - Get Report , Lumentum Holdings (LITE) - Get Report and Finisar (FNSR) - Get Report -- for the past 12 months or so, as seen here and here and here and here.
And I have had an active debate in the Comments Section with some who see value in the space.
After the close, Ocular met quarterly expectations but guided lower and optical stocks got hit, again. Here is a transcript of the company's conference call.
OCLR's fiscal first-quarter results were solid but the outlook for the December and March quarters has been lowered owing to weakness in its key products.
CFP/2/4 demand in China was weak (a continuing concern I have had). More importantly, a sudden drop in the QSFP28 market, with prices weakening and inventories building -- something also seen in Lumentum's results -- is accelerating. As well, forward weakness in the CFP2-ACO outlook is concerning.
Given the above, look for Finisar and others to move lower.
Ocular's shares are likely to hit a new low, and I would continue to avoid the sector.
Originally published Nov. 2 at 7:22 a.m. EDT. Doug Kass fills his blog on RealMoney every day with his up-to-the-minute reactions to what's happening in the market and his legendary ahead-of-the-crowd ideas.
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