Valens Equity Weekly Insights - 2023 04 25
Infinera Corporation (INFN) has transformed its profitability profile through its development of pluggable modules and its shift in focus to shorter length data transmission. Uniform Accounting highlights that the market is pricing in a plateau in returns growth, but management is confident about executing on their strategy and is aligned to continue to do so, signaling the potential for equity upside as the company continues seeing returns improve.Infinera has historically seen low returns as it focused on long-haul optical data transmission. Since it introduced pluggable modules that increase data speed for shorter distances, it has seen an inflection in its returns, with Uniform ROA reaching its highest level in 2022 since 2015. If the company is able to continue growing its more profitable pluggable business, it should be able to beat market expectations.
Infinera's management is closely aligned to focus on top line growth, decrease operating costs, and sell higher-margin products, which should drive profitability expansion and key to Infinera's equity upside scenario.
Management confidence in the Q4 earnings call about expense management and sales growth of new products suggest management is positioned to execute above market expectations.
INFN
INFN
Infinera is a supplier of networking solutions comprised of networking equipment, software and services. The company's portfolio of solutions includes optical transport platforms, converged packet-optical transport platforms, optical line systems and disaggregated router platforms. Also, the company's product portfolio includes the Infinera DTN-X Family, the Infinera hiT 7300 platform, the Infinera mTera Series, the Infinera 7100 Series, the Infinera 7090 Series, and the Infinera XTM Series, among other. Software products include the Infinera Transcend Software Suite, which includes software-defined networking and network management software, and the company's converged network operating system routing software.
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