Please ensure Javascript is enabled for purposes of website accessibility

Why Infinera Stock Dropped Today

By Evan Niu, CFA - Mar 9, 2020 at 1:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Coronavirus fears and a plunge in oil prices are roiling global markets.

What happened

Shares of Infinera (INFN -1.24%) have dropped today, down by 10% as of 12:30 p.m. EDT, amid a broad market sell-off over novel coronavirus fears and a precipitous plunge in oil prices. Investors are becoming increasingly concerned that the COVID-19 outbreak could cause a global recession, and tech companies with operations in China face greater exposure.

So what

As the number of confirmed coronavirus cases continues to climb worldwide, the macroeconomic risks are mounting. Infinera uses four contract manufacturers to produce its optical networking equipment, with most of those facilities concentrated in Asia -- specifically, China, Malaysia, and Thailand. The company notes in regulatory filings that it is able to "redirect select manufacturing activities to U.S. qualified factories of three electronic manufacturing services partners."

Red stock chart going down

Image source: Getty Images.

Infinera reported fourth-quarter results last month, and its guidance for Q1 included an estimated impact of $15 million related to the coronavirus.

Now what

The coronavirus outbreak isn't expected to hurt demand for Infinera products very much, so the risks primarily relate to supply-chain disruptions. On the conference call with analysts, CEO Tom Fallon said:

While we have very limited exposure [to the coronavirus outbreak] from a customer perspective, our supply chain does include some risk for material either sourced directly by Infinera or indirectly through some of our supply partners. The situation in China continues to evolve. And due to the unknown duration and magnitude of the coronavirus outbreak, it is too early to fully assess the projected impact on our ability to service our customers.

Revenue in the first quarter is expected to be $323 million, plus or minus $10 million.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Infinera Corporation Stock Quote
Infinera Corporation
INFN
$5.60 (-1.24%) $0.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.