Infinera Stock Is an Affordable 5G Stock That Could Double or Triple

Infinera Stock Is an Affordable 5G Stock That Could Double or Triple

Why INFN Stock Looks Cheap Right Now

As more organizations dive deeper into 5G technology as a way to power the wireless communications of the future, I expect we could see a renaissance in the 5G space.

One rapidly growing player in the optical networking and 5G sectors is Infinera Corp. (NASDAQ:INFN), a developer of advanced optical networking solutions. Infinera stock presents a compelling risk/reward opportunity to investors.

Infinera generates more than $1.0 billion in annual revenues from more than 1,000 customers around the world. The company serves the majority of the world’s biggest telecommunications service and Internet content providers. (Source: “Investor Day 2021,” Infinera Corp., last accessed January 24, 2023.)

In terms of fundamentals, Infinera is financially sound and is heading toward profitability.

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As for share-price performance, INFN stock has rallied by 50% over the last three months but remains 42% below its five-year high of $12.39 (set in May 2018) and down by 71% from its record high of $25.24 (set in August 2015).

With Infinera stock’s current price weakness, the company is undervalued. This provides opportunities for risk capital.

Chart courtesy of StockCharts.com

Infinera Corp.’s Financials Translate to Attractive Valuation

Infinera’s revenues have risen in its last four consecutive reported years. Its revenues nearly doubled from 2017 to 2021, translating to a compound annual growth rate (CAGR) of 17.9% during this period.

Analysts’ consensus estimate has Infinera growing its revenues by 6.6% to $1.5 billion in 2022, followed by 8.9% to $1.7 billion in 2023. (Source: “Infinera Corporation (INFN),” Yahoo! Finance, last accessed January 24, 2023.)

This means Infinera Corp. trades at just 0.95 times its consensus 2023 revenue estimate.

Fiscal YearRevenuesGrowth
2017$740.7 MillionN/A
2018$943.4 Million27.4%
2019$1.3 Billion37.7%
2020$1.4 Billion4.4%
2021$1.4 Billion5.1%

(Source: “Infinera Corp.,” MarketWatch, last accessed January 24, 2023.)

Infinera produced two straight years of positive earnings before interest, taxes, depreciation, and amortization (EBITDA), following three years of EBITDA losses.

Infinera Corp.’s move toward positive EBITDA indicates that it has been doing a good job on the cost side as its revenues go higher.

Fiscal YearEBITDA (Millions)Growth
2017-$81.6N/A
2018-$54.433.2%
2019-$57.8-6.0%
2020$7.4112.8%
2021$26.5257.8%

(Source: MarketWatch, op. cit.)

Moving to the bottom line, Infinera Corp. has lost money building its business, but the company has a pathway toward positive generally accepted accounting principles (GAAP) diluted earnings per share (EPS) in 2023.

Analysts expect Infinera to report an adjusted profit of $0.03 per diluted share in 2022 and $0.30 per diluted share in 2023. (Source: Yahoo! Finance, op. cit.)

Fiscal YearGAAP Diluted EPSGrowth
2017-$1.32N/A
2018-$1.36-2.9%
2019-$2.16-59.0%
2020-$1.1049.2%
2021-$0.8225.0%

(Source: MarketWatch, op. cit.)

Infinera Corp.’s free cash flow (FCF) was negative in its last five reported years, but the company’s revenue growth and move toward profitability should drive up its FCF toward positivity. In fact, Infinera reported positive FCF of $8.6 million for the third quarter of 2022.

Fiscal YearFCF (Millions)Growth
2017-$79.9N/A
2018-$116.8-71.0%
2019-$197.6-44.4%
2020-$151.323.4%
2021-$13.391.2%

(Source: MarketWatch, op. cit.)

Analyst Take

Infinera Corp. is a favorite of institutional investors; 270 institutions hold the majority of INFN stock. Moreover, company insiders have been actively buying shares Over the last six months, insiders bought 545,731 shares of the stock and sold none. (Source: Yahoo! Finance, op. cit.)

The fact that Infinera Corp. has been generating major revenues and the company trades at a low valuation makes Infinera stock compelling. It might be a good idea for investors to follow the moves of institutional investors and the company’s insiders.