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Goldman Removes Infinera From 'Sell' List, Upgrades To Neutral

Infinera Corp. shares are down 17 percent year-to-date. Goldman Sachs’ Doug Clark upgraded the rating for the company from Sell to Neutral, citing the recent pullback in shares. The price target has been maintained at $16.

Limited Downside To Valuation

Since being added the Sell list on September 7, 2015, Infinera’s shares have declined 28 percent, as compared to a 1 percent decline in the Russell 2000.

“Our Sell thesis was based on our view that Infinera’s premium valuation was not reflective of mid-term risks such a choppy end market and rising competition,” analyst Doug Clark wrote. He added that there was now limited downside risk, with shares trading broadly in-line with historical valuations.

Limited Downside To Estimates

The company’s addressable market has expanded 100 percent, with M&A and new product launches. Clark commented that the company was getting “closer to realizing the synergies and market share gains of these efforts.”

The analyst expressed optimism regarding Infinera achieving gross margin expansion, backed by a favorable mix shift to high margin line card sales and Instant Bandwidth.

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