Here's Why Infinera Corp. Shares Will Bounce Above $10

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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Infinera  (NASDAQ: INFN  ) gained about 3% this morning after Goldman Sachs upgraded the optical networking technologist from buy to conviction buy.

So what: Along with the upgrade, analyst Simona Jankowski reiterated her price target of $11.50, representing about 33% worth of upside to yesterday's close. So while momentum traders might be turned off by Infinera's price weakness over the past six months, Jankowski's call could reflect a sense on Wall Street that the risks surrounding the company's growth prospects are overblown.

Now what: According to Goldman, Infinera's risk/reward trade-off is particularly attractive at this point. "We expect optical industry revenue growth to accelerate due to the transition to 100G and rising network infrastructure investment, while profitability is structurally improving following significant consolidation," said Jankowski.

"We view Infinera as best positioned to capture that inflection given its strong DTN-X 100G product cycle, outsized exposure to Web 2.0 customers, and discount EV/S relative to optical peers." More important, with Infinera still sporting a rock-solid financial position and sluggish stock price, the downside might be limited enough to bet on that bullishness. 

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