Today Goldman Sachs downgraded Infinera to Sell and set a $19 price target. To justify this, they used a forward PE model of 20, down from their original 27. They also believe there will be short term margin pressures to occur after the new product launches. This is nothing that hasn’t already been factored in by the Infinera management team.
What they are misleading the public on is that while in the short term the margin pressures may very well be true, the long term outlook is extremely favorable. Per the analyst at GS, they expect Infinera to:
Double their total addressable market by this time next year
Provide 32% Revenue growth for the year
Provide EPS growth of over 500% for the year
Make no mistake. Goldman is issuing this update on the short term so they can get in now for better pricing. It’s a do it while they can before the next earnings report sets in and the price gets away from them.
The management team at Infinera has been completely transparent with their guidance. Tom Fallon has delivered on that guidance 11 out of the 11 past occasions.
I see no news from Infinera that would suggest a different course of action.