Optical stocks slip following cautious Q3 outlook from WIN Semi.
WIN Semiconductors, the Taiwanese company that calls itself the "global leader in GaAs foundry services," reported second quarter revenue of NT$4.57B, which was up 2% quarter on quarter and up 20% year on year. EPS was NT$2.16, compared to NT$1.74 for the first quarter of 2018. Gross margin declined sequentially by 1.7 percentage points to 32.4%, and operating margin declined 2.6 percentage points to 20.7%, WIN reported. In terms of its outlook for the third quarter, WIN stated that, due to demand being not as strong as the same period before due in part of customers experiencing inventory correction, it expects revenue to decline around 10% quarter-on-quarter. WIN also expects its Q3 gross margin to be around the level of low thirties, it reported. MKM COMMENTS: MKM Partners analyst Michael Genovese, who has a Buy rating on Lumentum (LITE), said the weakness in the stock following WIN's commentary on 3D VCSEL inventory build up is a buying opportunity, according to Bloomberg. He disagrees with the concern voiced on inventory building on 3D VCSEL, the news service added. PRICE ACTION: In early trading, Lumentum shares are down 9% to $54.10, Oclaro has dropped about 4% to $8.73 and Finisar (FNSR) has declined 3% to $17.00 per share.