How Infinera Corp. Stock Fell 28% in August

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What happened

Shares of Infinera (NASDAQ: INFN) fell 27.9% in August 2017, according to data from S&P Global Market Intelligence. The plunge started with a sharp drop in early August, when a mixed second-quarter report plus a weak forward guidance led to a 17% share price drop the next day.

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So what

In the second quarter, Infinera's sales fell 32% year over year to land at $177 million. The maker of fiber-optic networking equipment for long-range and data center connections also reported an adjusted net loss of $0.15 per share, down from positive adjusted earnings of $0.21 per share in the year-ago quarter. Analysts were looking for a $0.16 loss per share on roughly $181 million in top-line revenue.

Looking ahead, Infinera painted a third-quarter revenue target near $190 million and management expects to see a non-GAAP net loss of approximately $0.16 per share again. Both of these guidance targets were worse than Wall Street's projections at the time.

Now what

Infinera CEO Tom Fallon explained that the second quarter's soft sales were due to a large order closing after the end of that reporting period. That makes sense for the second quarter but should then result in an unexpected revenue uptick in the third quarter, and that's not happening.

The company has been asking investors to forgive its soft results while Infinera is investing in new products and platforms to capture future growth opportunities, but that story is starting to wear thin. Revenue is shrinking and Infinera is burning cash on a quarterly basis, and investors are taking notice of these negative trends:

This should be a turnaround story in the making, but signs of an actual upturn are few and far between. Infinera's plunging share prices make sense against this gloomy background.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Infinera. The Motley Fool has a disclosure policy.