Quick Win by the Algorithm: OCLR Stock Soars After Buyout Deal

Quick Win by the Algorithm:

Source: MC-2 Experience via Pinterest

“I am very pleased that two of the optical industry leaders, Oclaro and Lumentum, will join forces.  Together, we will be an even stronger player in fiber optic components and modules for high-speed communications and a market leader in 3D sensing.  This is a fantastic combination for all of our stakeholders, including stockholders, employees, customers and partners. I am extremely proud of what the Oclaro team has accomplished over the last five years. We have enjoyed tremendous success and this combination will create even more exciting opportunities for the team.”

— Greg Dougherty, Oclaro’s CEO

Following Oclaro’s (OCLR) Press Release on March 12th, 2018, Oclaro’s stock jumped from $6.89 to $9.93 per share, outperforming the market by more than 51%. Upon examining the drivers behind this impressive growth that occurred within the past month, the most recent press release by Oclaro provides the following highlights and updates that shed light on the stock event:

  • Best in class photonics capabilities join forces to accelerate innovation and industry roadmaps
  • Straightens and broadens R&D capabilities and product portfolio
  • Estimate more than $60 million in annual run-rate synergies within 12 to 24 months
  • Expected to be accretive to non-GAAP earnings per share immediately after closing

Lumentum Holdings Inc., a leading provider of photonics products for optical networking and lasers for industrial and consumer markets, and Oclaro Inc., a leader in optical components and modules for the long-haul, metro, and date-center markets, announced on March 12th, that the two companies have signed a definitive agreement, unanimously approved by the boards of directors of both firms, pursuant to which Lumentum will acquire all of the outstanding common stock of Oclaro. For each share of Oclaro stock held, Oclaro stockholders will be entitled to receive $5.60 in cash and 0.0636 of a share of Lumentum common stock, subject to the terms of the definitive agreement.

The transaction values Oclaro at $9.99 per share or approximately $1.8 billion in equity value, based on the closing price of Lumentum’s stock on March 9, 2018, of $68.98.  The transaction value represents a premium of 27% to Oclaro’s closing price on March 9, 2018 and a premium of 40% to Oclaro’s 30 day average closing price.  Oclaro stockholders are expected to own approximately 16% of the combined company at closing.

“Joining forces with Oclaro strengthens our product portfolio, broadens our revenue mix, and positions us strongly for the future needs of our customers.  Oclaro brings its leading Indium Phosphide laser and Photonic Integrated Circuit and coherent component and module capabilities to Lumentum.  The combined company will drive innovation faster and accelerate the development of products to enable our customers to win,” said Alan Lowe, Lumentum’s President and CEO.  “We are delighted to welcome the talented Oclaro team to Lumentum and look forward to a swift completion of the transaction with a focus on supporting our customers and delivering shareholder value.”

The transaction is expected to generate more than $60 million of annual run-rate synergies within 12 to 24 months of the closing and be immediately accretive to non-GAAP earnings per share. Lumentum intends to fund the cash consideration with a combination of cash on hand from the combined companies’ balance sheets and $550 million in debt financing.  The transaction is expected to close in the second half of calendar 2018, subject to approval by Oclaro’s stockholders, antitrust regulatory approval in the US and China, and other customary closing conditions.

Additionally, Oclaro on March 9th announced it is integrating its leading 400 Gbps technology into the QSFP-DD high-density transceiver form factor. This new 400 Gbps (4x100G PAM4) QSFP56-DD module will enable 36 ports of 400 Gbps per 1RU, representing a 400 percent increase in bandwidth and faceplate density compared to similar-sized 100 Gbps QSFP28 transceivers. Data center traffic is projected to grow at a compound annual growth rate (CAGR) of 27%, reaching 19.5 ZB per year in 2021.

Thus, based on the context above, one can see that Lumentum joining forces with Oclaro strengthens their product portfolio, broadens their revenue mix, and positions both firms strongly for the future needs of their customers. The combined company will drive innovation faster and accelerate the development of products to enable their customers to win. Together, both companies will be an even stronger player in fiber optic components and modules for high-speed communications and a market leader in 3D sensing. This buyout acquisition is a fantastic combination for all of Oclaro’s stakeholders, including stockholders, employees, customers and partners. In addition to the buyout, Oclaro increased their stock value with their new integration of its leading 400 Gbps technology into the QSFP-DD high-density transceiver form factor. “The increased bandwidth capability of the 400G QSFP56-DD module represents a much-needed innovation,” said Vladimir Kozlov, Founder and CEO of LightCounting. “With the availability of these modules, data centers will be able to achieve breakthrough switching capability that will drive their future growth. LightCounting forecasts that sales of 400GbE transceivers will reach $300 million in 2019 and close to $2 billion by 2022.”

As such, it can be noted that due to the buyout announcement between Oclaro and Lumentum and Oclaro’s integration of their 400 Gbps technology, OCLR’s stock increase of 56.63%  fell in accordance with the algorithms predictions which had accurately predicted the said rise using artificial intelligence and machine learning prior to the press release announcements given last week. Such an impressive stock hike outperformed the market by more than 51% on average over the past week.

Source: Yahoo Finance, March 18th, 2018

On February 14th, 2018, I Know First issued a bullish 1 Month forecast for OCLR stock. the forecast illustrated a signal of 47.95 and a predictability of 0.45. In accordance with the forecast, OCLR’s stock returned 56.63% over this one month period, highlighting the accuracy of the prediction produced by the I Know First algorithm.

Current I Know First subscribers received this bullish OCLR forecast on February 13th, 2018.

To subscribe today click here.

Small Cap Stocks To Buy

How to interpret this diagram

Oclaro, Inc. (NASDAQ: OCLR), incorporated on June 29, 2004, is a provider of optical components, modules and subsystems for the core optical transport, service provider, enterprise and data center markets. The Company provides various solutions for optical networks and interconnects driving the next wave of streaming video, cloud computing, application virtualization and other bandwidth-intensive and high-speed applications. The Company supplies core optical network technology to telecommunications and data communications equipment companies across the world. It targets communications equipment manufacturers that integrate its optical technology into the switching, routing and transport systems they offer to the global service and content providers that are building, upgrading and operating high-performance optical networks. It designs, manufactures and markets optical components, modules and subsystems that generate, detect, combine and separate light signals in optical communications networks. It supplies transmission products at the component level and the module level into 10 gigabits per second (Gb/s), 40 Gb/s and 100 Gb/s communications solutions.

Disclaimer

Before making any trading decisions, consult the latest forecast as the algorithm updates predictions daily. You can use the algorithm for intra-day trading. The predictability tends to become stronger with forecasts over longer time-horizons such as the 1-month, 3-month and 1-year forecasts.

Please note-for trading decisions use the most recent forecast. Get today’s forecast and Top stock picks.