Infinera Corporation (NASDAQ:INFN) shares rallied more than 58% in last month alone after hitting the 52-week low of $6.10 early in the last month. INFN stock tumbled last month after posting lower than expected financial results for the fourth quarter. Though the stock has pared some losses in the past few weeks, analysts expect limited upside in the days to come.

Infinera posted revenue of $195 million in Q4 – which was higher than the year-ago revenue of $192 million, down from the consensus estimate of $205 million.

Moreover, pricing pressure and lower margins turned the stronger revenue growth into losses for investors.  The Infinera Corporation gross margin dipped to 24.1% relative to 35.2% in the previous quarter and down from 38.1% in the same period last year. Consequently, GAAP net loss widened to $0.50 per share from a loss of $0.25 per share in the fourth quarter of 2016.

Positive Outlook Supports Upside Trend For Infinera Corporation

Its gross margin, which was the critical driver in expanding losses in the fourth quarter, will improve to 40% in Q1 based management guidance.  Moreover, Infinera believes its move towards CE4 products, will steadily grow the gross margin throughout 2018 – CE4 products carry lower costs than predecessor products.

Also, the potential improvement in demand for new products could enhance the production volume, which will allow Infinera to leverage its fixed cost infrastructure.

“With our full product refresh nearing completion, positive sales momentum ending the year, and a significant pipeline of opportunities, we enter 2018 with confidence that our recent positive revenue trajectory will continue,” CEO said.

>>Infinera Corporation Posted Strong Results – Here’s What To Expect

The company expects to generate revenue growth in the range of 10% this year – enhancing the possibility of returning to profitability and positive cash flow in the final two quarters of 2018. The latest rally in INFN stock indicates trader’s confidence in its future fundamentals and business strategy of introducing new products.

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