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Infinera Corporation Message Board

  • alpha1beta2gamma3 alpha1beta2gamma3 May 2, 2013 7:18 AM Flag

    Revenue Growth Rates

    I wanted to check INFN's growth rates to see if growth is accelerating. If this is a product cycle stock, that's necessary for the stock price to go on a tear.

    Looking at INFN's quarterly YoY growth rates over the last three years, it looks like the company should post the highest quarterly YoY quarterly growth rate in Q2, a growth rate of 44 percent. In Q1, it posted the 2nd highest, 19 percent. Not bad.

    Analysts have raised their estimates, and Q3 looks decent, but Q4 shows a deceleration in growth. Not ideal:

    2013 2012 2011
    Q1 19% 13% -3%
    Q2 44%* -3% -14%
    Q3 19%* 8% -20%
    Q4 7%** 14% -4%

    * analyst estimates, ** deduced

    It looks to me as if they are using the company's 20 percent growth rate and backing into the Q4 number. I think that's being conservative. This is partly why I suspect this year might end up higher than 20 percent. Something would have to be real screwy (a big project in Q1 and Q2, for example) to see such a sharp growth slowdown.

    Also, if they hit analyst estimates for revenue in 2013, they'll have the best year they've ever had (?), 529.9 million, a good 21 percent increase from last year.

    Next year, analysts are calling for 596 million, a 12 percent increase over this year. That's not bad, but it is going to have to go up much more that that. I would say a 20 percent increase would be considered good.

    Analysts are just like most in that they will take a wait-and-see attitude and they are usually late to start raising their numbers -- they can only raise their numbers if they see real progress. Thus, they'll need to see more wins. On the other hand, speculators and believers who like the technology and have noticed the positive changes can start betting early.

    Sentiment: Buy

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    • Analysts continue to raise their revenue estimates. (Some must have been tardy and not have reported their numbers as of two days ago, when the earlier post was written.)

      Latest forecasts call for a 22 percent increase in revenue this year. That's better. Given the momentum in Q1, and the order activity, the numbers should be above the 20 percent top-end guidance.

      The fourth quarter is now expected to show 12 percent growth. That's better, though it sill might prove low. The prior 7 percent looked much too low.

      Next year is still expected to show a deceleration in growth, 12 percent. With a bit of luck, and a big win or two, I think INFN beats that.

      Sentiment: Buy

    • I believe these numbers do not include the possibility of VZ being a customer. If we assume VZ becomes a customer in late 2013, it would contribute nicely towards 2014 revenue, that, plus business taken away from ALU would likely beat the 2014 revenue forecast by a wide margin. IMO, it will come in the range of $650M to to $700M.

      Admitedly, the VZ win is not certain, but I believe that VZ is leaning towards equipment from INFN, both have been in presentations together and collaborated in demonstrations in conferences. I believe VZ is waiting to see if INFN can deliver the features in a timely fashion, that VZ needs for the long term. I believe that SDN and eventually MPLS are features VZ needs to have in the equipment. I think INFN is working hard to incorporate SDN at current time and MPLS down the road. INFN's engineering has to execute in order to secure the win.

      Sentiment: Buy

      • 2 Replies to long_term_cap_gains
      • I agree that VZ is not in the numbers. Analysts, as a rule, and certainly as a group, will only revise when contracts are signed. In some sense, that's conservative -- but understandable.

        I also tend to agree that VZ is leaning toward INFN. If not, it's the strangest courtship I've seen, "we're just friends."

        I don't know enough about VZ's needs to know what they want from INFN, but I do hope they've "communicated" their needs and INFN is listening.

        Do you assume VZ would be $100 million a year to INFN, at least at the outset? I have been meaning to research this, and I should at some point. I think an easy way would be to see how much traffic or some other metric or even some financial metric VZ is responsible for in INFN's markets and then compare that with the overall market and ratio appropriately.

        Sentiment: Buy

      • BTW, I am hoping that INFN demonstrates SDN (not a prototype) at the Packet-Optical Transport Evolution 2013

        Sentiment: Buy

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