Oclaro, Inc. (OCLR) closed Tuesday's trade at $8.1. We believe that the weakness in the stock price is temporary and the stock has at least 15% upside potential from current levels.
Why we think so?
In a presentation for the 29th Annual ROTH Conference on March 14, 2017, the company has stated that one of its key customers ZTE announced a settlement with U.S. agencies on March 7. Oclaro added that its visibility with ZTE was very good and it does not see any signs of inventory build.
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At the time of its Q2 conference call, the company had expressed concerns about its ability to continue shipping product to ZTE, which contributes more than 10% of revenues.
The verbatim statement being "At this time, we do not expect to see interruptions in our ability to continue shipping product to ZTE. However, we cannot be certain of what ultimately will happen."
In its quarterly SEC filing, the company had stated, "We do not know what export licensing rules will apply to ZTE after February 27, 2017, particularly now that a new administration has come to power in the U.S. which has threatened a more active trade agenda with China. Any action that precludes us from shipping product to ZTE, including the non-renewal of the temporary license, or to other customers in China, may have a material adverse impact on our revenues and results of operations."
In contrast to its earlier concerns, the company seemed upbeat about its relationship with ZTE and growth prospects in China in its presentation for the Roth conference. So, we tend to believe that the stock is well positioned for at least 15% gain from current levels.
OCLR featured on our premium service - Short-Term Investor on November 2, 2016 at an opening price of $8.07 and touched $10.18 on November 21, returning a gain of 26% in just 14 trading days. Again on Jan 19, we published the stock at $8.92. On Feb 21, the stock touched a new high of $11.3, returning a gain of 27% to investors.
Originally, we identified OCLR on Feb 3, 2016 and published the stock on Short-Term Investor the same day at an opening price of $4.13. The stock marched on and Sep 22, it touched $9.34 representing a gain of 126% from our published price.
by RTT Staff Writer
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