Oplink Feeling Downturn Impact

Oplink Communications Inc. (OPLK - Snapshot Report) reported revenues of $43 million in Q1:FY09, down 12.6% year over year but up 15.0% quarter over quarter. Gross margin was significantly down both on a GAAP and a non-GAAP basis mainly due to pricing pressure and less favorable product mix.

GAAP EPS was ($0.16), mainly due to an inventory charge of $4.1 million. Non-GAAP EPS of $0.15 missed our estimate by a penny. Going forward, management was cautious about the impact of current macro conditions on telecom capital spending and expects to report revenues around $34.0 million $38.0 million in Q2:FY09.

Revenues from core passive products and ROADM are also expected to decline. Gross margins are forecasted to remain under pressure due to competitive pricing, potentially lower volume and poor product mix. Non-GAAP EPS should come between $0.03 -$0.07. We have adjusted our FY2009 estimates accordingly and maintain our Hold rating on the stock with a revised target price of $9.00.

The stock is currently trading at 26.9 times our FY2009 EPS estimate of $0.32. Our current target price of $9.00 implies a P/E of 28.1 times our FY2009 EPS estimate.

Read the full analyst report on OPLK