Why Infinera Corp. Is Poised to Bounce Back

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Infinera (NASDAQ: INFN  ) climbed about 5% in premarket trading Wednesday after Goldman Sachs upgraded the optical networking technologist from neutral to buy.

So what: Along with the upgrade, analyst Simona Jankowski planted a price target of $11.50, representing about 36% worth of upside to yesterday's close. While momentum traders might be turned off by the stock's weakness in recent months, Jankowski's call suggests growing sentiment on Wall Street that Infinera is now too cheap to pass up. 

Now what: According to Goldman, Infinera's risk/reward trade-off is particularly attractive at the moment. "We believe consensus is underestimating the revenue growth potential associated with customer upgrades and market share gains in 100G long haul, which is forecast to grow at nearly a 40% CAGR through 2015," said Jankowski. When you couple that upbeat outlook with Infinera's solid balance sheet and sluggish stock price, it's tough to disagree with Goldman's upgrade.

Editor's Note: The previous version incorrectly identified Goldman's analyst call as a downgrade. This version has been corrected and The Motley Fool apologizes for the error.

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  • Report this Comment On March 12, 2014, at 10:52 AM, DSmod wrote:

    You write, "it's tough to disagree with Goldman's downgrade." I reckon you meant to say 'upgrade', seeing as how it was... an upgrade.

  • Report this Comment On March 12, 2014, at 10:55 AM, foolishdave wrote:

    When you couple that upbeat outlook with Infinera's solid balance sheet and sluggish stock price, it's tough to disagree with Goldman's downgrade.

    typo? think you meant upgrade

  • Report this Comment On March 12, 2014, at 3:45 PM, TMFEZMagic wrote:

    DSmod and foolynaround, thanks for heads up! I absolutely meant "upgrade". All fixed now. :)

  • Report this Comment On March 12, 2014, at 3:52 PM, surflyfe wrote:

    Interesting post. On the same day this was posted there was a post on Motley Fool saying "Things don't look too good for Infinera today as it's only earned three out of seven possible passing grades."

    So which one is it? The Motley Fool seems to be playing both sides.

    http://www.fool.com/investing/general/2014/02/12/is-infinera...

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