Basic INFN Revenue Question

Investment Analysis Clubs Saul’s Investing Discussions
1

Hello Friends,

As your humble resident Ignoramus, I thought I would ask the most basic of questions. First, though, a preamble:

Due to lots of good and thorough and disciplined and knowledgable folks on this board, plus our own Infinera Wizard Kevin, we now know a banana-boat-full of inside juice about Infinera the company and about a bazillion acronyms like PICS and ICPs and DCIs and WDMs and Cloud Xpresses. And all these things make it seem like Infinera is making all the right stuff to satisfy the ever increasing bandwidth demand.

The way too obvious question: When do we get revenues? As in, when do we get revenues that show Infinera the company is growing way faster than the stock price, and that the stock is undervalued? Yahoo is still showing a super-high P/E, in GAAP terms. When does the E get to increase substantially rather than theoretically?

Monkey’s not fishing for crystal balls here, but is fishing––banana picking, actually––for any sense of major tipping points and thresholds of revenue acceleration or proof of concepts not in theory, but in actual bottom-line financial SEC documents.

As in: are we six months away? Three years away? Five years away? How many more clients do we need before it becomes clear Infinera is eating the competitors’ banana sundaes?

Monkey has been with Infinera since 2009 and remembers when it had the most sophisticated technology. But that ended up meaning bumbkus because all of a sudden a different better technology was being demanded so a few years were lost due to needing to ramp up R&D again and on and on; Monkey was fooled into thinking best technology = immediate revenues. Obviously not so.

Therefore, to ye Networking Wizards: given the obvious explosion of bandwith demand and the confidence of the Infinera suits that they have the legit goods to offer the market, how long until the bananas ripen? Can we even begin to predict this? Monkey’s always willing to look long term to watch the 'naners ripen, but he’s not sure he’s got another five years left with Infinera before any proof of concept, cha-ching-wise.

Thoughts?

And obvious apologies for the basic goober nature of this question,

Monkey
Long INFN since 2009

31 Likes
2

Monkey,

I can only provide a quick reply on where to obtain some of what you are looking for:

http://s21.q4cdn.com/892601718/files/doc_presentations/2016/…

If you look at slide 6 you will see the growth tragectory Infinera is on. The growth gap has been steadily increasing each quarter, and this presentation has been updated rach quarter as a result.

As for what you referred to in the early days, I think you are referring to the decision by Infinera to skip 40g and go right into 100g. They lost out on some short term market opportunities as a result, but that decision paid dividends when 100g hit.

Hope this info helps.

Best,
Kevin

6 Likes
3

Hi Kevin,

Thanks for the link to the presentation.

It looks like slide 28 answers the question best:


3 years of >20% revenue growth

Solid Balance Sheet
? $207M net cash (end FY15)
? FY15: Positive Cash Flow from Ops every quarter
? Cash Flow from Ops = $133 million
? Free Cash Flow/Revenue = 10.3%

Q4 ‘15 Performance
? $261 million revenue
? 48.3% gross margin
? $33 million operating income

Q1 ’16 Guidance
? $240 - $250 million revenue
? 47.5% - 49.5% gross margin
? 10% - 12% operating margin
? $0.15 - $0.19 EPS

I can recall reading one of the earnings call transcripts where Tom Fallon was asked about competitive pricing and his response was that Infinera doesn’t compete on price, that the products provide the highest value and lowest TCO in the industry (naturally, I’m paraphrasing as this is from memory).

Revenues are going up faster than market growth (taking market share), margins are expanding (pricing power) and we keep seeing, thanks to Kevin’s work, a bunch of wins (great growth potential).

One could expect the stock price to performed a bit better than it has. Let’s see what Tom says on the next earnings call.

DJ

6 Likes