Rosenblatt's Mike Genovese initiated coverage of Infinera at Buy with a $12 price target, implying 40% upside from Thursday's close.
Market acceptance of Infinera's ICE-6 products is high, Genovese says, in an environment where capital expenditures in the telecom and cloud areas are strong. ICE-6 has "many" new customers and design wins, including "more than a handful" of Tier 1 U.S./international telecoms and ICPs.
A further growth driver should come from the company's ICE-XR point-to-multipoint pluggables.
Meanwhile, the company expects revenues will grow 8-12% annually over the next three years, and margins are increasing even as those at competitors are under pressure from an industry mix shift. Infinera expects its gross margins to improve 300-400 basis points this year and next, with operating margins up 200-300 bps/year.
Genovese also pointed to "strong and resilient" telecom and cloud capital spending in a strong initiation of Ciena.