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Why Infinera Stock Jumped Today

Timothy Green, The Motley Fool

What happened

Shares of Infinera Corp. (NASDAQ: INFN) jumped on Monday, after the optical networking company was upgraded by an analyst for the second time in less than a month. Infinera reported solid fourth-quarter results in February, which led to the first upgrade. The stock was up about 9.7% at market close.

So what

Analysts at MKM Partners upgraded Infinera stock from neutral to buy on Monday, maintaining a $6 price target. This came just a few weeks after MKM Partners boosted the stock to a neutral rating. The $6 price target was put in place after that first upgrade, an increase from a previous price target of $4.25.

A rising stock chart

Image source: Getty Images.

These upgrades follow a fourth-quarter report that beat analyst expectations but featured not-so-great guidance. Revenue came in at $332.1 million, up 72% year over year and about $12 million above the average analyst estimate. Non-GAAP (generally accepted accounting principles) earnings per share came in at a loss of $0.25, ahead of analyst expectations by $0.02.

Infinera expects first-quarter revenue of $308 million, plus or minus $10 million, along with a non-GAAP EPS loss of $0.27, plus or minus $0.02. Analysts were expecting revenue guidance of $327.5 million and non-GAAP EPS guidance for a loss of $0.20.

Now what

Analyst upgrades can move stocks in the short run; that appears to be what happened with Infinera today. But in the long run, the company's financial performance is the only thing that can drive the stock higher. Infinera's fourth-quarter results were solid, but analysts were expecting stronger guidance.

Infinera's revenue grew in 2018 after a couple years of declines. To undo the stock's decline over the past few years, the company will need to keep up the momentum.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool recommends Infinera. The Motley Fool has a disclosure policy.