Why Infinera Stock Just Dropped 8%

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What happened

Infinera Corporation (NASDAQ: INFN) sort of shot itself in the foot on Tuesday, advising investors it’s going to need a bit more time to ready its Q3 financial report, which has been “delayed” until November 12 “in connection with Infinera’s integration of three separate global instances of SAP into a single enterprise resource planning system during the quarter.”

Adding injury to insult, the optical networking equipment maker mentioned in passing that it’s probably going to miss earnings — or at least sales, which will come in between $324 million and $327 million this quarter, instead of at the $330 million that Wall Street had been expecting.

In a market that’s geared toward growth stocks, that news didn’t go over well, and Infinera lost 5% of its market cap yesterday in response. Today it’s down another 8.2% in noonday trading. This time, though, you can blame Jefferies & Co. instead of Infinera itself.

Optical cables plugged into a server

Image source: Getty Images.

So what

So what exactly did Jefferies do to cause today’s stock ruckus? Not a whole lot, really. Jefferies simply downgraded Infinera stock from “hold” to “underperform.” But that simple fact — without even the publication of a new price target, according to ratings reporters — appears to have been sufficient to spook investors.

Now what

But that may be a good thing.

If you ask me, investors should feel a bit spooked at the prospect of investing in a stock that hasn’t earned a full-year profit since 2015, and that has burned cash for three straight years — going on a fourth, according to the latest data from S&P Global Market Intelligence.

With most analysts in agreement that Infinera will lose money this year and probably won’t earn a profit next year, either, Infinera is one falling knife I would not willingly try to grab.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Infinera. The Motley Fool has a disclosure policy.

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