Shares of Infinera (NASDAQ: INFN) have popped today, up by 10% as of 12:10 p.m. EDT, following an analyst report that suggested that telecommunications giant Verizon (NYSE: VZ) is testing the company's 800G technology for a potential upgrade. Needham reiterated a strong buy rating on Infinera stock and $12 price target.
Analyst Alex Henderson says that Big Red is testing Infinera's 800G ICE6 offerings for its long-haul communications network. Henderson cautions that "a test of the technology is not a win, yet," but Infinera could potentially supplement existing supplier Ciena. Verizon confirmed to Light Reading last week that it had successfully tested a deployment between Dallas and Atlanta using Infinera equipment.
Infinera also currently supplies XO Communications, which could be an inroad to expanding its relationship with Verizon, which closed its acquisition of XO's fiber business in 2017.
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"To be clear, we think [it's] likely Ciena will announce 800G deployment with Verizon first[,] likely in the next several months," the analyst wrote in a research note to investors. "Verizon has indicated it will begin commercially deploying 800G in parts of its fiber network as soon as the second half of 2020."
That deployment will be critical in meeting the needs of business customers that require more bandwidth, as well as higher traffic related to 5G adoption. Henderson believes there is a chance that Infinera can displace "stumbling" Nokia, which is falling behind the competition in 600G and 800G. Ciena and Infinera are likely to both emerge as winners, and scoring a part of the deal could "radically alter" the thesis for Infinera, according to the analyst.
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