Infinera Corporation (INFN, Financial) is a leading manufacturer of digital optical telecommunications equipment that enables deployments and upgrades of high-speed networks. It fits into our turnaround category. Delays in product introductions and other operational issues caused the company to lose market share and face margin pressure. Going into 2020, Infinera was making meaningful progress on its multiyear turnaround plan, with its backlog improving on the strength of new product introductions that helped the company gain momentum with customers. The coronavirus pandemic then hampered its near-term business prospects, extending the timeline of the turnaround and putting significant pressure on the stock.
Infinera Corporation (Nasdaq: INFN)
Yet we continue to see an opportunity for Infinera to execute on its turnaround plan. While certain customer deployments may continue to be pushed out due to the pandemic, the optical end market in which it operates has favorable secular tailwinds around 5G deployment and the upgrade of existing fiber networks that need to meet the demands of higher network traffic. Infinera is well positioned with its new product roadmap to capitalize on these trends as evidenced by record bookings for some of their products in 2020’s first quarter. Furthermore, Infinera is making headway on outsourcing certain elements of its manufacturing process to a contract manufacturer, which should improve operational reliability and improve margins. The company also bolstered its liquidity through a convertible debt offering that should give it more than enough runway to make it through any near-term market weakness while continuing to execute on long-term growth initiatives.
From Royce Investment Partners' Royce Opportunity Fund commentary "4 Deep Value Picks for a Recovering Market"
