Why Infinera Shares Imploded

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Infinera (NASDAQ: INFN  ) , which bottomed out at a nearly 14% loss earlier today, are sitting on a nearly 8% loss as of this writing after the company failed to impress Wall Street with improved guidance despite a double beat on its earnings report last evening.

So what: Infinera reported revenue of $138.4 million and a $0.01 loss per share for the second quarter. Its top line was a 48% year-over-year improvement, and also bested the $133.6 million consensus. Its narrow loss also surpassed the $0.02 loss per share Wall Street was looking for. However, Infinera noted that its "visibility" into bookings for the upcoming quarter is less than usual, and executive caution regarding third-quarter guidance was a major reason why the stock dropped. Guidance for a revenue range of $135 million to $145 million for the third quarter does beat the consensus of $135 million, and a $0.01 to $0.07 range for EPS also comes in ahead of Wall Street's expectation for zero earnings.

Now what: Despite caution, Infinera did provide guidance that surpassed analyst expectations. This drop seems rather unfounded, but with a near-double in the year to date, some large shareholders may have simply been looking for an ideally profitable exit point. There's nothing in this report that indicates weakness to come, and a cautious executive is better than a reckless one. Don't get too tripped up by the drop -- keep your eye on this one.

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