Infinera (INFN) shares are losing ground this morning after Goldman Sachs analyst Simona Jankowski cut her rating on the optical networking company’s shares to Sell from Neutral, with a target of $8.50, well below Friday’s close at $12.83.
She notes that the stock has rallied 100% over the last three months.
“While we believe the market extrapolated the recent quarter�s strength to next year�s estimates, we expect sales to moderate or even decline over the near term, as supply chain shortages get alleviated and as Infinera will likely lose share” in a coming technology transition. She adds that longer-term, the company’s recent strength “appears unsustainable, as Infinera�s pace of new customer additions has declined to three per quarter in 2010 from five per quarter in 2007, and its peak margins suggest that its mix of business is heavily skewed to line cards (i.e., shipments to existing customers) rather than the more forward-looking common equipment (i.e., new footprint buildouts).”
INFN this morning is down 60 cents, or 4.7%, to $12.23.
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