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Why Infinera Stock Dropped Today

By Steve Symington – Feb 26, 2020 at 3:21PM

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The impact of the coronavirus outbreak is holding back the telecom equipment leader's growth.

What happened

Shares of Infinera Corporation (INFN 0.21%) fell 11.2% on Wednesday after the telecommunications equipment specialist announced strong fourth-quarter 2019 results, but followed with disappointing forward guidance.

So what

Infinera's adjusted quarterly revenue grew 14.8% year over year to $386.5 million, translating to non-GAAP (adjusted) net income of $6.4 million, or $0.03 per share. Though we don't normally pay close attention to Wall Street's demands, most analysts were modeling a loss of $0.02 per share on revenue closer to $365.7 million.

Red arrow with stock market data in the background indicating losses.

Image source: Getty Images.

"Major accomplishments this past year included strengthening our global customer base with 10 Tier 1 scale customer wins, significant growth in backlog, and continued progress in building our innovation pipeline as evidenced by announced DRX wins, the introduction of XR optics, and growing confidence in our plan to deliver 800G products to the market in 2020," Infinera CEO Tom Fallon said.

Now what

Looking forward to the first quarter of 2020, however, Infinera told investors to expect adjusted revenue of $315 million to $335 million (up roughly 10% year over year the midpoint), assuming a roughly $15 million negative impact from the coronavirus outbreak in China. On the bottom line, that should translate to an adjusted net loss ranging from $0.21 per share to a loss of $0.15 per share -- well below consensus estimates for a loss of $0.09 per share. 

Of course, it likely doesn't help that this high-flying tech stock had nearly tripled from last year's lows leading into this report. But until investors receive more tangible updates on the impact of coronavirus past the near term, I suspect Infinera shares will remain under pressure.

Steve Symington 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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