Shares of Oclaro climbed as much as 15 percent Wednesday after the company reported a fiscal first-quarter earnings blowout, driven primarily by high demand for the firm's products.
The stock later pared its gains, ending the day 4 percent higher.
The optical communications company posted first quarter earnings of 14 cents a share on revenue of $136 million, surpassing analysts' expectations for 10 cents a share on sales of $132 million, according to a Thomson Reuters consensus estimate.
The San Jose, California-based company also reported above-consensus second-quarter revenue guidance in the range of between $146 million and $154 million.
After Oclaro reported earnings late Tuesday, Piper Jaffray raised its price target on the company to $13 from $9.50 a share and maintained its "overweight" rating on the stock.
"[We] anticipate [Oclaro] will be the only company shipping in volume for an additional 1-2 quarters. Once more competition enters the market, we continue to believe Oclaro will see limited pricing pressure due to the industry being significantly capacity constraint," Troy Jensen of PiperJaffray wrote in a note Wednesday.
He also credited strong product demand in China, supplemented by traction in North America, as catalyst for revenue growth.
Smart devices, social networks, cloud computing, and even online streaming all rely on fiber optics to function. Oclaro specializes in the design, manufacture, and market of this technology, which is necessary for faster computer connectivity, speedier data transport, and increased bandwidth.
Oclaro's earnings beat comes ahead of its larger industry competitor Finisar—whose quarterly earnings report is scheduled for next Tuesday.
Shares of Oclaro have gained 119 percent so far this year.