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Why Infinera Stock Jumped Today

By Timothy Green – Updated Apr 12, 2019 at 5:30PM

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A second post-earnings upgrade lit a fire under the stock.

What happened

Shares of Infinera Corp. (INFN -0.27%) jumped on Monday, after the optical networking company was upgraded by an analyst for the second time in less than a month. Infinera reported solid fourth-quarter results in February, which led to the first upgrade. The stock was up about 9.7% at market close.

So what

Analysts at MKM Partners upgraded Infinera stock from neutral to buy on Monday, maintaining a $6 price target. This came just a few weeks after MKM Partners boosted the stock to a neutral rating. The $6 price target was put in place after that first upgrade, an increase from a previous price target of $4.25.

A rising stock chart

Image source: Getty Images.

These upgrades follow a fourth-quarter report that beat analyst expectations but featured not-so-great guidance. Revenue came in at $332.1 million, up 72% year over year and about $12 million above the average analyst estimate. Non-GAAP (generally accepted accounting principles) earnings per share came in at a loss of $0.25, ahead of analyst expectations by $0.02.

Infinera expects first-quarter revenue of $308 million, plus or minus $10 million, along with a non-GAAP EPS loss of $0.27, plus or minus $0.02. Analysts were expecting revenue guidance of $327.5 million and non-GAAP EPS guidance for a loss of $0.20.

Check out the latest earnings call transcript for Infinera.

Now what

Analyst upgrades can move stocks in the short run; that appears to be what happened with Infinera today. But in the long run, the company's financial performance is the only thing that can drive the stock higher. Infinera's fourth-quarter results were solid, but analysts were expecting stronger guidance.

Infinera's revenue grew in 2018 after a couple years of declines. To undo the stock's decline over the past few years, the company will need to keep up the momentum.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Infinera. The Motley Fool has a disclosure policy.

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