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Here's Why Infinera Stock Is Cratering Today

By Brian Feroldi - Nov 7, 2018 at 12:25PM

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Shares crashed after the company reported weak third-quarter results and issued guidance well below expectations. Here are the must-know details for investors.

What happened

In response to the maker of telecommunications equipment posting downbeat third-quarter results and issuing weak guidance, shares of Infinera (INFN 0.00%) fell 32% as of noon EST on Wednesday.

So what

Here's a review of the headline numbers from the company's third quarter:

  • Revenue grew 4% to $200.4 million. While this figure was within management's guidance range, it was below the $210 million that Wall Street was expecting. 
  • Non-GAAP gross margin fell 70 basis points to 38.4%. Management blamed the decline on larger customer orders, which are lower margin in nature.
  • Non-GAAP net loss was $6.7 million, or $0.04 per share. That figure matched the consensus estimates among the analyst community.

Switching gears to guidance, here's what management is foreshadowing in the quarter ahead:

  • Revenue is expected to land between $315 million and $335 million. While that figure is up massively year over year thanks to Infinera's recent acquisition of Coriant, it's not even in the ballpark of the $432 million that Wall Street was expecting. 
  • Non-GAAP net loss per share is expected to land between $0.26 and $0.30. This range is also far worse than the $0.07-per-share loss that analysts were expecting.
Falling stock chart superimposed over columns of numbers

Image source: Getty Images.

Between the weak quarterly results and the much lower-than-expected guidance, it isn't hard to figure out why investors are in a foul mood today.

Now what

CFO Brad Feller knew that Infinera's weak results and guidance weren't going to sit well with Wall Street, so he decided to offer a preliminary look at what is expected to happen in 2019 on the conference call with investors:

  • Revenue is expected to exceed $1.4 billion. For context, Wall Street was looking for $1.66 billion in full-year revenue. 
  • Margins are expected to gradually improve.
  • Non-GAAP profitability is expected to be achieved by year-end. 

Between the weak customer demand and lower-than-hoped-for projections, there are not a lot of positive takeaways for investors in this report. It's no wonder shares are currently trading at a 10-year low. 

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