Shares of Fabrinet (FN) are on the rise after the company reported better than expected fourth quarter results and guided earnings per share above consensus expectations. Following the earnings release, Piper Jaffray analyst Troy Jensen raised his price target on the stock to $52 citing improving optical demand and growth rates reacceleration. However, given the post-earnings stock price gains, his peer at Needham downgraded Fabrinet to Buy.

QUARTERLY RESULTS: Last night, Fabrinet reported fourth-quarter adjusted earnings per share of 81c and revenue of $345.3M, above consensus estimates of 75c and $338.12M, respectively. The company also said it sees first-quarter adjusted earnings per share between 80c-83c, above consensus of 79c, and revenue for the quarter between $347M-$355M, with consensus at $348.21M.

IMPROVING DEMAND: In a research note to investors, Piper Jaffray's Jensen raised his price target for Fabrinet to $52 from $42 and reiterated an Overweight rating, citing what he called its "impressive" results. The analyst said he believes the company's results confirm his thesis that optical demand is improving and believes growth rates will reaccelerate for the next several quarters. Pointing out that Fabrinet has a track record of rapid growth and profitability, Jensen argued that a turn in optical demand coupled with exposure to industrial lasers, autonomous vehicles, and new design wins provide the company the opportunity to grow faster than the optical industry. The analyst remains constructive on the shares and would be a buyer of the stock given his conviction with respect to Fabrinet's ability to exceed near-term targets, the opportunity to win share with new and existing customers and its position in growth markets.

NEEDHAM DOWNGRADES TO BUY: Meanwhile, Needham analyst Alex Henderson downgraded Fabrinet to Buy from Strong Buy but also raised his price target to $55 from $45. While acknowledging the company's "solid" earnings, strong guidance and "improving visibility", the analyst told investors that his rating change was due to the post-earnings stock price gains, as the new target implies a stock upside of "only 25%". Henderson pointed out that Fabrinet's non-optical business was especially strong as they harvest business from the FN West proto-typing facilities and ramped it in Thailand. This included LIDAR and other sensing related products, which helped the auto business jump 36% to $26M, he noted, adding that Industrial Lasers also shined with 37% growth to $47M. The analyst also highlighted that the drag from ZTE (ZTCOY) supply issues was about $7M and should ease slightly in the September quarter and diminish fully by Q4.

PRICE ACTION: In late morning trading, shares of Fabrinet have jumped over 6% to $6.77.