Finisar Corporation (FNSR), Ciena Corporation (CIEN): This Tech Stock Looks Like a Good Long-Term Investment

China Daily newspaper reported earlier this year that China Mobile Ltd. (ADR) (NYSE:CHL) will increase its capital spending by almost 50% this year to $30.5 billion with most of it expected to be spent on the 4G network. Hence, the prospects for Finisar’s telecom business seem bright going forward.

Datacom continues to gain
Revenue from Finisar’s data communications business increased 12.5% on a sequential basis in the previous quarter to $184 million. This side of Finisar’s business has been doing well and given the strong demand for its products for data centers, the positive momentum looks set to continue.

Finisar management is of the opinion that data centers wouldn’t increase just in number but in size as well, and spending will continue to remain strong to address the need for higher bandwidth. According to Infonetics, there are over 500,000 data centers in the world and Finisar is eyeing higher optical content in them as their size increases to manage higher-speed connections.

Moreover, according to TechNavio, the global data center construction market is expected to grow at an annual rate of 15.8% through 2016. Finisar seems well positioned to capitalize on this growth with its strong product portfolio while presence of customers such as Cisco is another advantage.

The takeaway
With Finisar Corporation (NASDAQ:FNSR)’s telecom business now growing and prospects in datacom looking strong, investors can expect strong performances going forward. Also, the company is almost debt-free and trades at a cheap 12 times forward earnings. All this makes Finisar a good investment even after its solid run up this year.

The article This Tech Stock Looks Like a Good Long-Term Investment originally appeared on Fool.com and is written by Harsh Chauhan.

Harsh Chauhan has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile.

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