Thanks for making me look stupid, Infinera
A couple of days ago, I told my readers to back off Infinera shares ahead of Thursday's fourth-quarter report. The company appeared to be lined up for a swing-and-a-miss performance in the short term, and I expected share prices to dive to comfortable buy-in levels.
But there was no miss. Instead, Infinera knocked the cover off the ball. The optical networker delivered a $0.06 non-GAAP loss per share on $112 million in sales, in both cases far better than either Wall Street estimates or management guidance predicted. Shares jumped as much as 14% in after-hours action.
So what sweet spot did Infinera find that helped it beat every expectation while rivals Oclaro
According to CEO Tom Fallon, Infinera simply stole market share. Juniper and others say that large telecom customers are holding back on their equipment orders; Fallon sings a very different tune about "continued solid demand from customers for Infinera's unique digital optical networks including cable, Tier One, and bandwidth wholesale service providers." In particular, his company received lots of budget-flush orders as 2011 wound down.
Sure, the company reported a small loss, but that's to be expected in the middle of new product rollouts. It takes a while to perfect brand-new manufacturing processes, and enterprise-class buyers like Infinera's favorite customers need to put that new stuff through its paces before plunking down large purchase orders. At the moment, four customers are kicking the tires of the high-end DTN-X platform that accepts superfast 500-gigabit fiber-channel modules. That product goes into full-volume production in the second quarter of 2012 with revenues dropping down in the quarters after that.
So my point about Infinera's long-term power is only amplified by these results. If you bought the stock at even lower prices, you did the right thing. But there's plenty of growth opportunity left for us laggards to capture. My bullish CAPScall on Infinera jumped from red to green last night, and the stock will continue to boost my all-star CAPS status for years to come. All at the expense of Juniper and Tellabs, of course.
Some elite investors never look stupid. You wouldn't believe what those geniuses are buying today while everyone else is selling.