Monday, January 31, 2011

Infinera Corp. (NASDAQ: INFN) Q1 2011 Analysis

Recent price: 7.34$
P/E Ratio: -
3 month Target Price: 11$

Company Description
Infinera has developed a solution that we believe will change the economics, operating simplicity, flexibility, reliability and scalability of optical communications networks. At the core of our Digital Optical Network architecture is what we believe to be the world’s only commercially-deployed, large-scale photonic integrated circuit, or PIC. Our PICs transmit and receive 100 Gigabits per second, or Gbps, of optical capacity and incorporate the functionality of over 60 discrete optical components into a pair of indium phosphide chips approximately the size of a child’s fingernail. We have used our PIC technology to design a new digital optical communications system called the DTN System. The DTN System is designed to enable cost-efficient optical to electrical to optical conversion of communications signals. The DTN System is architected to improve significantly communications service providers’ economics and service offerings as compared to optical systems that do not use large-scale photonic integration. We refer to these optical systems as traditional systems. Our carrier-class DTN System runs our Infinera IQ Network Operating System and is integrated with our Infinera Management Suite software, which together enhance and simplify network monitoring, management and control.

Confidence Margins
Strong resistance $12.90 (+76%)
Light resistance $11.15 (+52%)
Light support $6.23 (-15%)
Strong support $5.70 (-22%)

Here is another company that provided a weak earnings guidance when they released their last financial statements, compared to what analysts were estimating. This situation brought the company to be undervalued from a technical standpoint. The company should yield good results for investors that will be patient enough.

Entry strategy
For the cautious investor:
Buy the stock for 7.50$ or less.

For the risk-taking trader:
The April 2011 8$ call option contract seems to be the right position to take, they can be acquired for 40$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 11$, or keep it until 12.50$ if the stock crosses the light resistance level.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 11$, as for the cautious investor.

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