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Why Infinera Stock Fell 33.4% Yesterday

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Stock has lost one-third of market value

On November 7, the Technology Select Sector SPDR (XLK) was up 3%. Tableau (DATA), ServiceNow (NOW), Splunk (SPLK), and Square (SQ) rose 15.4%, 7.6%, 7.2%, and 7%, respectively. However, several tech stocks were negatively impacted due to poor earnings or forecasts. In this series, we’ll look at four stocks that fell over 10% yesterday. Infinera stock (INFN) fell 33.4% on November 7 to close at $4.15. The stock is currently trading 67% below its 52-week high of $12.39.

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Infinera reported sales growth of 4% YoY to $200.4 million in the third quarter of 2018 with non-GAAP (generally accepted accounting principles) EPS of -$0.04. While Infinera met earnings estimates, analysts expected the company to post sales of $210 million. The company’s gross margin declined 70 basis points to 38.4% driven by a fall in large customer orders.

Poor revenue forecast

Infinera missed revenue estimates in the third quarter, and it expects revenue between $315 million and $335 million in the fourth quarter, which is way lower than Wall Street’s forecast of $432 million.

Infinera’s revenue forecast indicates a YoY rise of 62%, primarily driven by its acquisition of Coriant. The company also expects non-GAAP EPS between -$0.30 and -$0.26, way lower than the analyst estimate of -$0.07.

We can see why investors were unimpressed. This poor guidance resulted in Infinera losing one-third of its market value in a single day. Infinera now has a market cap of $722 million. Out of the 16 analysts tracking Infinera, eight recommended a “buy,” eight recommended a “hold,” and none recommended a “sell.”

The average 12-month target price for Infinera is $7.42, indicating an upside potential of 79% from the current price.

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