INFN listed as stock to buy on the pullback

Investment Analysis Clubs Saul’s Investing Discussions
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This is the second time Infinera was sourced as a top stock to buy after the pullback. Of course, I’m sure there are lots of others.

From the Wall Street Journal:

http://blogs.wsj.com/moneybeat/2016/01/21/15-best-stocks-to-…

“If we bottom right now, then most stocks will be good stocks to own,” said Rocky White, quantitative analyst at Schaeffer’s. “However, the following stocks…should be some of the best stocks to own going forward.”

Among the 50 worst S&P 500 performers during the recent pullback, only one is still up over the past 12 months: Under Armour. Shares of the company closed Wednesday off 30% from their Nov. 3 close, but they were still higher than they were a year ago.

Broadening the analysis out beyond S&P 500 stocks, 14 stocks seem like good buys to Mr. White. They include biotech Sarepta Therapeutics Inc.SRPT -7.17%, oil company HollyFrontier Corp. HFC +0.51% and telecom Infinera Corp. INFN -0.49% This group was compiled by looking at stocks with closing prices above $10 that tumbled at least 20% during the selloff and remain up on a year-over-year basis as of Wednesday’s close.

Some technical analysts warned Wednesday that the market has further to fall. But for investors looking to get back in, history suggests the names above could be decent picks.

Sorry if this is may be viewed as market timing, etc. Regardless, on 2/11 we will get official confirmation from the source. Historically, we’ve seen a beat every quarter for the past 2 years. On top of that, management has guided above analyst consensus as its forecast. Their guidance has been incredibly reliable, as it should be having customers that plan months in advance and with the added benefit of being in the middle of the next quarter when they report.

Best,
–Kevin

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This is the second time Infinera was sourced as a top stock to buy after the pullback.

Thanks for your ongoing coverage, Kevin. I added to my INFN position yesterday. At an adjusted P/E of around 20’ish, I feel like it’s a reasonable value. And what has really convinced me to increase my position is what looks like early innings of a new pathway to growth through the data center (thanks again for highlighting this – I think it was that FB study you posted about that finally made the light bulb go on for me). I think it’s probably too early to truly understand the implications of that, but at this valuation level I feel like we’re getting that potential new path to growth for pretty cheap.

What are your thoughts?

Neil
Long INFN

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Personally, I think they set the dinner table back in November at SCNet where they boasted the build out and demonstration of the world’s fastest network.

This is the trade’s show of the year where every single participant in the network space helps to build out the network for this event, and they do it each and every year. Planning for each event starts a full year in advance - and when the event comes closer volunteers of the event assemble the environment. It takes about 3 days to build it, only to be torn down a day after the event concludes.

Here is a picture of that event from a network topology:

http://www.siliconinvestor.com/public/652837_aa20bec7a24472b…

Take a look at the Infinera corner in the upper right. First, CenturyLink shows its connections with the outside world coming in. Then, when it connects through to Infinera’s DTN-X, it shows a dense wave division multiplex at 1200G. Ciena and Alcatel-Lucent show their dense wave division multiplexing at 200G.

Incidentally, if you take a look at who is providing the 100G connections to the exhibitors at the conference. That would be the next box directly connected to Infinera - Arista Networks. The other routes coming from other vendors in the topology (Cisco and others) are at 10G and 1G.

Here is one of the press releases from the event, which lit up the world’s fastest network in the world for those 4 days:

http://www.scientificcomputing.com/news/2015/11/worlds-most-…

SCinet gives the SC conference attendees a unique chance to showcase and discover the latest research in HPC. By building the fastest, most innovative operational network possible every year, SCinet enables data-intensive research and live-use of high performing hardware to run multi-gigabit demonstrations, requiring a fast and robust infrastructure.

“This network is unrivaled with regards to its capabilities and the broad-reaching influence, both nationally and internationally, to support demonstrations and experiments that could not be done easily in any other place. It’s a one-of-a-kind environment where research meets production,” says Davey Wheeler, SCinet Chair and Senior Network Engineer from the National Center for Supercomputing Applications (NCSA) at the University of Illinois at Urbana-Champaign (UIUC). “As the SCinet Chair leading the development of this network, this year is a culmination of 17 years of experience working on SCinet from year to year. It is humbling and honoring to be able to work aside these colleagues and see the tremendous talent, dedication and creativity of the volunteers.”

SCinet is built by a team of expert volunteers from around the world, taking one year to design the network, three weeks to set it up, four days to operate it, and 24 hours to tear it down. Over 100 engineers from industry, academia and government institutions came together to build this network, using over $22 million in loaned equipment and over 89 miles of newly installed fiber optic cables.

For SC15, SCinet has connected multiple 100 gigabit circuits, bringing an unprecedented 1.62 terabits per second of bandwidth to the Austin Convention Center.

This was showcased to the world back in November, courtesy of Infinera and CenturyLink. If Infinera had any deals pending at the time, this news alone would have closed them.

Best,
–Kevin

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Hi Kevin,
Our company is supposed to be going through a quiet period right now and this is the busiest I have been during a quiet period. While we do not use Infinera’s equipment I have been installing numerous 100gig, 10gig and 1gig circuits. Of course the lower the bandwidth the more that I have installed. I also have talked to some of the long haul guys and they agreed that they have never been this busy at this time of year.

Just a small data point.

Andy

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Hey Andy, thanks for the data point from the field. That is really nice to hear.

Correct me if I am wrong, but I thought I recall you saying while your group focuses on the local network circuits, and as such, you don’t deal with Infinera equipment, but another group in your company does - is that the long haul team? Did they happen to mention if they filled anymore of their Infinera racks (aka “barneys”) with cards? Sorry for the blatant and direct fishing for info… Curious minds :slight_smile:

Best,
–Kevin

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Hello Kevin,
You are correct. The long haul guys have been busy and yes they are filling up the racks. They are cutting over the old Alcatel equipment into the Infinera racks. They have a lot of 500 gig pics in the racks now. The first two racks are full and the third rack is half way full. I was talking to them about the Infinera equipment and asking what they liked about it compared to the Ciena equipment (They have both) They said with the Infinera equipment it only took them 1 day to turn up a degree (point to point to another city) while with the Ciena equipment it could take up to 5 days. The Infinera equipment is more tolerant with problems with the fiber. It seems that they have been replacing some power packs on the Infinera equipment though. They are not sure if it is a problem with the bay or if they received a bad shipment of power packs. ( I think they might have them provisioned incorrectly, sometimes on those type of packs they have dac switches that need to be set correctly, but that is just a guess).

Andy

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It seems that they have been replacing some power packs on the Infinera equipment though. They are not sure if it is a problem with the bay or if they received a bad shipment of power packs.

Interesting. Does Infinera provide the power packs for the bays or are they sourced independently? And, please forgive me if I am asking too much…

Kevin

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They said with the Infinera equipment it only took them 1 day to turn up a degree (point to point to another city) while with the Ciena equipment it could take up to 5 days. The Infinera equipment is more tolerant with problems with the fiber.

I know my mind went right for the “is there something wrong” kind of question without commenting on the rest of what you just said.

Wow. That is awesome. When you have someone in the field providing an unbiased comparison like that it just speaks volumes. 1 day vs 5 days seems like such a huge advantage! Did they give any indication on the line speed vs fault comparisons?

And by the way thank you Andy!

–Kevin

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Does Infinera provide the power packs for the bays or are they sourced independently?

They have 3 bays on Kevin and only one of the bays is having a problem. It is interesting because it is the second bay that they installed. The power packs are made by Infinera. Although some of the parts might be outsourced (chips etc), since they are vertically integrated the equipment will be made by Infinera.

Andy

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Did they give any indication on the line speed vs fault comparisons?

Well Kevin the line speeds on the Infinera’s I looked at were at 500 gig. That is the only pics they are putting in at the line side, of course the client side they have lower bandwidth. As far as fault comparisons? I really didn’t think to ask about it. Now the long haul maybe different but in the metro area if we see any circuit taking any faults we generally will not turn it over. We would fix the problem first. I just assumed that long haul would do the same. Its possible that they might turn up a circuit with dribbling errors but I would doubt that. Although when a circuit is handed off to another piece of equipment it is generally cleaned up and regenerated so it could be possible. I will ask them next time I see them.

Andy

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Thanks for the update from the field Andy. Really great to know.

Best,
–Kevin

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Your welcome Kevin.

Have a great day.
Andy

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