Raymond James updated its model on II-VI Inc. (IIVI:NASDAQ), a manufacturer of optoelectronic components and devices, in light of three factors, noted analyst Simon Leopold. They are II-VI's acquisition of Coherent, II-VI's December 2021 financing of $900 million and expected growth in the datacom sector likely to positively affect II-VI.
As for the acquisition, closing of the transaction is pending approval in China. This is expected to happen in Q1/22, Leopold noted.
Assuming the deal closes, the financial services firm expects the combined company to generate sales revenue of $5.86 billion in 2023 and attain an earnings per share (EPS) of $4.79, wrote Leopold.
Looking nearer term, to 2022, Leopold highlighted that his firm expects II-VI to exceed the Street's estimates for sales revenue.
"II-VI leads market for data center transceivers," he wrote. As such, the expected growth in the datacom sector, led by hyperscale builders investing in 400G, 200G and 100G optical transreceivers, should boost sales of this product for II-VI by about 20%. Revenue from these sales is expected to comprise 10% to 15% of total sales revenue.
"Estimated overall hyperscale capex (adjusted for Amazon) grows 23% in 2022, and we believe II-VI has favorable exposure to the two biggest spenders, Google and Facebook/Meta," Leopold wrote.
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