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There's a new name in double-net land (stocks trading at between 1 and 2 times net current asset value or NCAV), technology name Finisar (FNSR) . Stocks that land here and trade at such a relatively low multiple of net current assets don't usually do so because of an improving balance sheet, but rather due to a steep price decline.

Finisar: A New Name in Double-Net Land

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"If it is indeed true that II-VI is gearing up capacity to supply VCSELs to Apple, it should cause more pain to Lumentum than Finisar, given the unit volumes that each of these vendors ship today and/or will be shipping to Apple for the remainder of the year," Dmitry Netis, a William Blair analyst, said in a note to clients. "We believe that II-VI may be ramping up the low-powered VCSELs, which Finisar does not manufacture. Finisar, at Apple's request, has been focused on high-powered VCSELs out of its 4-inch Allen, Texas, fab."

Apple Seen Sticking With Finisar, Which May Get An Overhaul

The overall datacomm components sector faces "meaningful challenges" ahead, but the "valuation penalty" assigned to Finisar is overblown, Marshall said in the Thursday upgrade note. When the analyst initiated coverage of Finisar, the stock's 2019E P/E was 1.5x below the comparable median, which seemed "appropriate" at the time, Marshall said. But the 2019E P/E now stands at four turns below the median of 16.4x and more than 10 turns below on an ex-cash basis at 8.4x versus the 18.9x median.  In addition to an attractive valuation, Finisar boasts multiple catalysts ahead, Marshall said: New CEO Michael Hurlston is set to complete a full strategic review of the company and should share findings in June. The introduction of a lower-cost CWDM4 should help its presence and profitability in the datacomm market. If the company finalizes its VCSEL facility in Sherman, Texas in the fall of 2018 instead of early 2019, it could contribute an incremental 20 to 40 cents upside to EPS expectations.

Finisar Is Oversold, Morgan Stanley Says In Upgrade