updated 11/12/2010 10:17:30 AM ET 2010-11-12T15:17:30

Shares of Finisar jumped more than 12 percent Friday and one analyst lifted the company's price target, citing strong demand in China.

Finisar Corp., which develops fiber optic network equipment, said late Thursday that third-quarter sales would probably beat Wall Street expectations. The company based in Sunnyvale, Calif., increased its fiscal second-quarter revenue outlook as well.

Its stock surged $2.21, or 12.3 percent, to $20.14. Over the last year, the shares have traded between $7.65 and $21.44.

William Choi of Jefferies & Co. said in a client note that Finisar is likely benefiting from strong demand in China, "where we've heard of strong 40G and optical-based wireless backhaul spending."

Finisar has been able to increase its sales in China by more than 20 percent quarter over quarter Choi said, and he said growth will probably continue near term.

Choi also sees significant growth for reconfigurable optical add-drop multiplexers. ROADMs are devices that can add, block, pass or redirect modulated infrared and visible light beams in a fiber optic network.

"We believe demand for ROADMs remains strong, as carriers increase network bandwidth and add network flexibility to respond to rapid changes in traffic patterns," he wrote.

Choi raised Finisar's price target to $20 from $16 and maintained a "Hold" rating.

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