Infinera's (NASDAQ:INFN) stock popped 10% to a four-month high on July 20 after Verizon (NYSE:VZ) successfully tested its 800G ICE6 solutions across 400 miles of a long-haul fiber route between Dallas and Atlanta (which it gained from its takeover of XO Communications in 2017).

Needham analyst Alex Henderson noted a "test of the technology is not a win," but believes Infinera will eventually "find a perch" inside Verizon's fiber networks. Henderson claims Verizon could split its orders between Infinera; its larger rival Ciena (NYSE:CIEN), which previously supplied Verizon with optical solutions; and other companies.

Henderson believes Verizon will likely announce an 800G contract with Ciena first, then award an additional contract to Infinera to replace Nokia's (NYSE:NOK) aging optical solutions. Nokia currently trails behind Infinera and Ciena in the 600G and 800G markets. Investors should always take analysts' predictions with a pillar of salt, but could winning an 800G contract from Verizon bring the bulls back to Infinera?

An Ethernet cable placed on a laptop keyboard.

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Understanding Infinera's uneven growth cycle

Infinera helps internet service providers, content providers, and data center customers boost the bandwidth of their networks without laying down additional fiber. It accomplishes this task, which saves time and money, by splitting optical signals across additional wavelengths.

Current-gen fiber networks operate at 100G to 200G speeds over long-haul distances (over 2,000 km), and 400G to 600G speeds across shorter distances. Infinera's new ICE6 solutions will help customers hit 800G speeds across shorter segments of long-haul networks -- including metro and DCI (data center interconnect) regions -- to support the rollout of 5G networks and serve the rising usage of cloud and streaming services.

Infinera previously generated most of its revenue from long-haul solutions, but many customers prioritized shorter range metro and DCI upgrades instead. To increase its exposure to the shorter-range market, Infinera bought its industry peer Coriant in late 2018, then accelerated its development of 800G solutions to keep pace with Ciena.

Infinera's adjusted revenue rose 39% to $1.3 billion last year, but that was mainly attributed to its takeover of Coriant. It didn't provide any guidance for the full year last quarter, but analysts expect its adjusted revenue and earnings to rise 4% and 27%, respectively.

Infinera experienced supply chain disruptions and shifted orders during the COVID-19 crisis, but its revenue and earnings growth should stabilize as it sells a higher mix of higher-margin 600G and 800G products.

Could Verizon spark a rally in Infinera's stock?

Verizon generates most of its revenue from its core wireless business, and it sold its data centers to Equinix several years ago.

A close-up photo of a fiber optic cable.

Image source: Getty Images.

However, Verizon's Consumer and Business segments still provided nearly 6.5 million broadband connections across the U.S. at the end of 2019, and its takeover of XO made it the country's top provider of high-speed fiber connections. Verizon claims those fiber networks will support the expansion of its 5G wireless infrastructure.

Speaking to telecom industry blogging outlet Telecompetitor, Verizon VP Kevin Smith noted Infinera was one of Verizon's "multiple" suppliers during its test runs, and the official deployments would be completed over the next two to four years.

That statement supports Needham's claim that Verizon will use Infinera's 800G solutions, but it doesn't shed any light on the actual size of a potential deal. Therefore, investors shouldn't assume Verizon will sign a massive deal with Infinera that matches its orders from Ciena.

Nonetheless, inking a deal with Verizon could bring other fiber providers -- including AT&T, EarthLink, CenturyLink, and Frontier -- to Infinera's table. If that happens, Infinera's stock, which trades at less than one times its annual revenue, could attract a lot more bulls.