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How Infinera's Stock Rose 33% in July

By Anders Bylund - Aug 10, 2020 at 12:20PM

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The optical networking veteran partnered with a leading telecom to show off its fastest fiber-powered products over very long distances.

What happened

Shares of Infinera (INFN 5.23%) gained 33.3% in July 2020, according to data from S&P Global Market Intelligence. The vertically integrated maker of optical networking gear, from optical line systems to full-fledged carrier-class routers and switches, started this climb when an analyst said that telecom giant Verizon (VZ 0.83%) is testing Infinera's fastest solutions for a potential large-scale contract.

So what

That analyst report was swiftly followed by a joint press release from Verizon and Infinera confirming the rumor with additional detail. The two companies have completed live fiber network tests, moving data at 800 gigabits per second over a 414-mile fiber and 400 gigabits per second in a 2,540-mile circuit.

Verizon described these tests as the foundation for the "blazing fast gigabit speeds, super low single-digit millisecond latency, and huge scalability" that will follow when the company completes its 5G network upgrades. Verizon's public support of Infinera's high-speed solutions for long-haul networks could inspire other telecoms to give the company a second look, too.

A bundle of optical fibers in colorful lighting.

Image source: Getty Images.

Now what

Infinera followed up on July's strong gains with a fantastic earnings report in the first week of August. Share prices rose another 15% the day of the report.

The company is not profitable, making it hard to measure its market value by simple price-to-earnings ratios. On the other hand, Infinera's trailing sales have surged 89% higher over the last three years, and the rollout of 5G networks should inspire continued revenue growth over the next couple of years. That's a classic growth stock in my book, and the 5G era should provide fertile ground for further gains.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Infinera and Verizon Communications. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$45.15 (0.83%) $0.37
Infinera Corporation Stock Quote
Infinera Corporation
$5.63 (5.23%) $0.28

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