Surge in Newport Corp. Stock Price Perplexes Analysts

Newport Corp.’s stock surged to a 52-week high Monday, baffling several analysts who follow the Irvine fiber-optics component maker.

The shares moved up to $95.88 before settling back to close at $87.63, up $4.63 for the day in Nasdaq trading. The stock has risen steadily for more than a month, aided by a 3-for-1 stock split June 1.

The company may be benefiting from the hot fiber-optic communications market, said Kevin C. Slocum, a Wit SoundView analyst. “Over the last month or so, all the stocks in this group have staged a strong rebound,” Slocum said.

While both Slocum and Jeffrey Martin of Red Chip Review say Newport has solid fundamentals and is a leader in its field, both also feel the stock is in danger of becoming overvalued.

“I haven’t heard any good explanation for why the stock is worth $10 more today,” Slocum said, referring to the run-up early in the session. “I would argue it’s probably a little ahead of itself.”

Slocum said he expects Newport’s earnings to exceed Wall Street’s second quarter expectation of about 12 cents a share, but added, “I wouldn’t be surprised to see the stock pull back in coming weeks.”

The stock didn’t have a lot of exposure before the end of last year, Martin added. “Institutions have really gotten hold of it. As long as they’re holding, you’re going to get some support, but if they were to start to liquidate, the stock could react pretty quickly.”

Newport representatives weren’t available for comment.