This hi-tech company’s shares are being driven higher, and Zack’s Investment Research rates it a “strong buy”. Our second recommendation is a sale of a financial business, based on weakened technical criteria.
Buy: NeoPhotonics Corporation (NPTN)
from The Oberweis Report
NeoPhotonics Corporation (NPTN) develops, manufactures and sells optoelectronic products that transmit, receive and switch high speed digital optical signals for communications networks.
The company specializes in high-speed (greater than 100 Gb/second) products, which represented 43% of revenue in the year ended December 31, 2014. 100 Gb networks are among the highest growth segments of the optical communications market, supporting the rapid expansion of backbone networks and accommodating increased internet and mobile traffic. Over the next few years, high-speed optical networks will migrate from long-haul applications to metro and enterprise data center applications, more than doubling NeoPhotonics’ available market.
The company’s 100 Gb and beyond products are produced using photonic integrated circuits (PICs) from in-house silicon, indium phosphide and gallium arsenide wafer fabrication. These individual PICs from different materials are then combined using the company’s hybrid integration technology to make complete products, such as integrated coherent receivers for 100 Gb coherent transport applications.
To supplement its product offering, the company purchased the tunable laser and transceiver product lines from EMCORE Corp (EMKR) for $17.5 million in January 2015.
NeoPhotonics sells its products to the world’s leading network equipment manufacturers, including Alcatel-Lucent SA, Ciena Corporation, Cisco Systems, Inc., and Huawei Technologies Co., Ltd. These four companies supplied roughly 70% of the world market for 100 G coherent communications ports and accounted for a similar percentage of the company’s revenue in the year ended December 31, 2014.
In the company’s latest reported first quarter, sales increased approximately 19% to $81.4 million from $68.2 million in the first quarter of last year. NeoPhotonics Corporation reported earnings per share of $.13 in the latest reported first quarter versus a loss in the same quarter of last year.
Jim Oberweis, CFA, The Oberweis Report, www.oberweisreport.com, 800-323-6166, June 2015