Infinera is down today on no news. It is down because it is following Ciena lower.
Why is Ciena lower?
One of Ciena’s key suppliers, Neophotonics (NPTN), announced earnings last night that blew estimates out of the water. Along with this good news they also announced:
Due to the strengthening demand and strong volume growth for both our long haul and metro 100G coherent products, together with strong Book-to-Bill, virtually all existing production capacities for these products are now booked out, and we are now in the process of adding capacity at module level, component level and chip level to keep up with demand acceleration.
Ciena is down because this creates a supply problem for Ciena. They won’t be able to accelerate growth beyond a certain constrained amount.
Infinera, however, does not have this problem. They’ve been building out excess inventory in anticipation of demand. Tom Fallon said quite clearly that they will be using time as a weapon.
All of these supply chain bottlenecks mean good things for Infinera. They have the means to deliver on all that great demand.
Why the stock continues to follow Ciena around all the time is a mystery. The market is not paying attention to these details.