The demand environment for optical equipment suppliers is improving, and Infinera Corp. INFN has an impressive product pipeline, according to Piper Sandler.
The Infinera Analyst
Troy Jensen upgraded Infinera from Neutral to Overweight and with a $8.50 price target.
The Infinera Thesis
Work-at-home initiatives during the coronavirus pandemic are putting excessive stress on carrier and data center networks, resulting in rising demand for optical equipment suppliers, Jensen said in the Thursday upgrade note. (See his track record here.)
Supply constraints are now being alleviated, as China is reaching near full production capacity, the analyst said. Although production concerns are emerging from countries like Malaysia and Thailand, these are “less of a concern versus China,” he said.
The 600G Groove platform, which was launched last year, has been gaining momentum and is likely to ramp through 2020, Jensen said.
Infinera has a healthy pipeline of new technologies that “should help sustain their momentum” in the second half of 2020 and through 2021, the analyst said.
These tailwinds, coupled with the recent selloff in the company’s shares, create “a compelling risk/reward scenario,he said.
INFN Price Action
Infinera shares were trading 5.87% higher at $5.05 at the time of publication Thursday.
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