Yahoo Finance Infinera Corporation (NASDAQ:INFN) Just Reported, And Analysts Assigned A US$6.82 Price Target
Shareholders in Infinera Corporation (NASDAQ:INFN) had a terrible week, as shares crashed 24% to US$4.33 in the week since its latest first-quarter results. Revenues of US$330m beat expectations by a respectable 3.8%, although statutory losses per share increased. Infinera lost US$0.55, which was 59% more than what the analysts had included in their models. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for Infinera
Following last week's earnings report, Infinera's 14 analysts are forecasting 2020 revenues to be US$1.35b, approximately in line with the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 40% to US$1.22. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$1.38b and losses of US$0.82 per share in 2020. So it's pretty clear the analysts have mixed opinions on Infinera after this update; revenues were downgraded and per-share losses expected to increase.
The consensus price target fell 14% to US$6.82, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Infinera, with the most bullish analyst valuing it at US$12.00 and the most bearish at US$3.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that Infinera's revenue growth is expected to slow, with forecast 0.8% increase next year well below the historical 8.8%p.a. growth over the last five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.2% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Infinera.
The Bottom Line
The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Infinera. Unfortunately, they also downgraded their revenue estimates, and our data indicates revenues are expected to perform worse than the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Infinera going out to 2024, and you can see them free on our platform here.
You still need to take note of risks, for example - Infinera has 3 warning signs we think you should be aware of.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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