On Monday, B.Riley adjusted its price target for Infinera Corp . (NASDAQ: NASDAQ:INFN), reducing it to $6.65 from the previous $9.00, while still recommending a Buy rating for the stock.
This change follows Infinera's second-quarter earnings report, which surpassed consensus estimates with sales of $342.7 million and an EPS of $(0.06), compared to the predicted $332 million and $(0.08) respectively.
Infinera's quarterly revenue showed a year-over-year drop of 8.9% but marked an 11.7% increase from the previous quarter. The growth was primarily attributed to a 66% rise in sales to Internet Content Providers, totaling $125.3 million. Revenue from Tier-1 Service Providers also saw a 5.2% increase, while revenue from other Service Providers fell by 12.3%. The company's book-to-bill ratio remained above 1.
The company, which is in the midst of an acquisition by Nokia (HE:NOKIA) (NYSE: NOK) at a price of $6.65 per share, did not hold a conference call due to the pending transaction. Despite the absence of a call, Infinera has continued to secure new business, including a design win for its 800G ZR/ZR+ products with another major hyperscaler.
Reflecting on higher operating expenses, B.Riley has revised its EPS estimates for Infinera for the years 2024 and 2025, moving from $(0.07)/$0.36 to $(0.10)/$0.27. The new price target of $6.65 is based on an enterprise value-to-sales multiple of 1.46x, down from the previous 1.7x, applied to the firm's 2025 revenue estimate, adjusted for net debt, and aligns with the offer price from Nokia.
InvestingPro Insights
As Infinera Corp. navigates the changing landscape of the telecommunications industry, its financial metrics and analyst insights offer a clearer picture of its market position. According to InvestingPro, Infinera's market capitalization stands at $1.39 billion, reflecting the scale of its operations within the sector. Despite a challenging period with revenue declining by 9.07% over the last twelve months as of Q2 2024, the company's stock price has seen a significant year-to-date total return of 23.79%, indicating investor optimism for its future prospects.
InvestingPro Tips suggest caution due to the company's high Price / Book multiple of 10.53 and a negative P/E ratio of -12.79, highlighting the market's valuation of its assets and profitability concerns. However, analysts predict Infinera will turn profitable this year, which could be a pivotal point for the company. It's worth noting that Infinera does not pay a dividend, suggesting that it is reinvesting earnings back into the company to fuel growth and product development, such as the 800G ZR/ZR+ products mentioned in the article.
For investors seeking more comprehensive analysis, InvestingPro offers additional insights, including an updated fair value estimate of $4.60, which contrasts with the analyst target of $6.65. This discrepancy may warrant further investigation by those considering an investment in Infinera. Furthermore, there are 6 more InvestingPro Tips available that could provide deeper analysis and aid in making a more informed investment decision.
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