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.
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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