Monkey's Infinera Earnings Poll

Investment Analysis Clubs Saul’s Investing Discussions
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Friends,

Monkey’s been thinking about the upcoming earnings report from the good folks over at Infinera, and here are a few possible kinds of reports we might hear––

  1. The Good: We’ve been cutting deals left and right and north and south. We got the googles and we got the eye-talians and the europeans, and we got the amazons and the facebooks and all the little and big digital weenies. We got the telcos and the tiers one and two and three and all of them tiers. And we’ve been charging and getting paid, son. We got increasing revenues and increasing margins and the demand ain’t stopping because Internet. While other folks are seeing a drop in demand, we’re seeing more orders than we know what to do with. Because, you, know, Pic technology, etc. Yeehaw!

  2. The Bad: See above. But the Princess is in another castle.

  3. The Ugly : Gosh darn it, this stuff’s too complex even for us. It’s fun to play with the toys, but there’s no bananas in this here enterprise because the R & D costs won’t ever come down and they won’t ever let up and it’s a good hobby but, folks, stop investing in us. Growth and demand doesn’t matter if the business is not investor friendly. So not only is the Princess in another castle, there is no Princess. Sorry.

What’s your wager?

Humbly,

Monkey
Long INFN, SWKS because he can’t help himself from shiny fancy technology that promises buckets of bananas as soon as…

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“Don’t eat green bananas”

Amazing wisdom found tattooed on the butt cheeks of a Brazilian orangutan.

Not sure what this means but I hope we hear something good on Wednesday.

I like your posts Monkey :slight_smile:

Frank

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INFN is a double for me today (purchases in 2011, 2012, and earlier this year).

Looking at the 2015 Q4 earnings call: http://seekingalpha.com/article/3890616-infineras-infn-ceo-t…

Financially, our 33% year-over-year growth marks a third consecutive year of growing at more and double the rate of the overall market. Even without Transmode, the core Infinera business grew in the mid 20% fueled by continued strength in long haul and the early success of Cloud Xpress.

OK, so mid 25%ish YOY growth, cash flow positive. Transmode is a big deal:

Of utmost importance in 2016, we will be completing the Transmode integration which will require heavy lifting and financial investment. Full integration gives us an end to end portfolio with best in class unified management and access to a $15 billion TAM. While it will take time to translate early positive indications into financial results we’re expecting, I believe we are on track for the Transmode acquisition to be accretive in 2016 and instrumental to our long term success.

So, big spending now for payback later. No short-term pops here.

Additionally, we intend to make important investments in 2016 to expand our direct and sales presence with governments, tier 3s and LATAM and APAC.

Not just R&D spending, but marketing and sales expenses will rise. No short-term pops here.

As for what the first quarter expectations were:
As a reminder, the first quarter in our industry can be challenging as customers take time to finalize their CapEx budgets, convert them into orders and build networks. Based on the last three years of data from Dell’Oro and IHS, in the first quarter the overall DWDM market has declined on average approximately 14% sequentially.</>

They set a low bar.

With over 4 years of ownership under my belt, it’s obvious that this is a solid business; it’s managed well and has great technology. But, it’s not going to burn any barns. The need for their products isn’t growing super quickly, and for now they’re growing faster by taking business away from others - but INFN is getting big enough that that can’t last forever:

Looking now to 2016, consistent with industry analysts we anticipate the overall market to grow 6% to 7% in long haul DWDM, 9% to 10% in Metro DWDM and double digits in DCI. Growth estimates for the DCI market vary considerably between industry analysts but all [ph] project the market will grow substantially in 2016. While overall long haul growth is slowing, our aggressive deployment in a 100G long haul footprint over the past few years places Infinera in an excellent position to continue to outgrow the long haul market.

OK, I’m slow. It’s clear to me that this is a stock to trade. Sell at least some when it’s up and buy more when it’s down. If I had been doing that the past few years, I’ve have done a lot better in INFN than I have so far.

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Orangutans are Asian, not South American.

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Yep, you is right Tamhas :slight_smile:

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Hate to bring this up again. But I was reminded of banannas again on another board elsewhere in investor land.

But I must say, if I had been thinking straight on the day I mentioned something about Brazilion orangutans, who buy the way, were actually in Brazil because they had been sent there to find more bananas where ever they could be found

But I digress. My important point(illustrated in my profound metaphor) was that monkeys (us) should buy green bananas and then harvest them when they are ripe.“amazing wisdom” :slight_smile:

Harumph,
Frank

MY green and red comparisons aren’t as good today as they were yesterday :frowning: but I might do some reallocating of bananas.

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