Why Infinera Is Soaring Despite a Loss

When Infinera Corp. (NASDAQ: INFN) released its fourth-quarter earnings report late on Wednesday, the telecommunications equipment maker said that it had a net loss of $0.12 per share and $195.8 million in revenue. The consensus estimates had called for a net loss of $0.13 per share on revenue of $189.8 million. The same period of last year reportedly had a $0.12 per share net loss and $181.0 million in revenue.

In terms of the revenue breakdown for the quarter, the company posted $160.5 million in product revenues, an increase of 6% from last year. Services revenue increased nearly 19% to $35.3 million.

Gross margin for the quarter totaled 37.5%, compared to 39.1% in the third quarter of 2017 and 41.8% in the fourth quarter of 2016. Operating margin for the quarter was −9.3%, compared to −7.8% in the third quarter of 2017 and −9.2% last year.

The company did not issue any guidance for the first quarter. However, the consensus estimates call for a net loss of $0.16 per share on $179.99 million in revenue for the quarter.

On the books, Infinera’s cash, cash equivalents and short-term investments totaled $263.9 million at the end of the quarter, down from $304.3 million in the same period of last year.

A couple of analysts have weighed in on Infinera since the earnings report:

  • Deutsche Bank has a Buy rating and raised its price target to $11 from $10.
  • B. Riley raised its price target to $11 from $10.75.

Tom Fallon, Infinera’s CEO, commented:

In Q4 we made some difficult but necessary decisions to reposition the company for crisper execution and increased focus on our go to market strategy. With our full product refresh nearing completion, positive sales momentum ending the year, and a significant pipeline of opportunities, we enter 2018 with confidence that our recent positive revenue trajectory will continue.

Shares of Infinera trade up nearly 26% at $8.69 Thursday morning, with a consensus analyst price target of $9.44 and a 52-week range of $6.10 to $12.50.